What Is Fixed Capital? Definition, Pregnant In Addition To Examples

Definition of Fixed Capital

In general, the definition of fixed capital tin last stated every bit under.

“Fixed working capital alphabetic quality is a compulsory initial investment made past times the entrepreneur to offset upwards the activities of his business.”

Fixed working capital alphabetic quality is a mandatory erstwhile investment made at the introductory stage of a trouble concern establishment.

Fixed working capital alphabetic quality is non alike working capital, which is required on a continuous reason to operate (run) the ordinary course of teaching of production together with distribution of goods together with services.

land, building, mechanism together with other assets having a relatively permanent existence.”

Fixed working capital alphabetic quality is a permanent investment made to consider the longer-term needs (requirements) of the trouble concern activities.

Thus, fixed working capital alphabetic quality has a permanent beingness inward the business. It is unremarkably introduce inward the shape of fixed assets similar land, building, plant, machinery, etc.

Meaning of Fixed Capital

The pregnant of fixed working capital alphabetic quality is depicted inward the next chart.

The pregnant of fixed working capital alphabetic quality tin last easily grasped from these points:

1. Fixed working capital alphabetic quality is a compulsory initial investment made inward the business.
2. It helps to lay downwardly the basic infrastructure on which trouble concern is supposed to stand upwards together with flourish inward a long run.
3. It is a part of full working capital alphabetic quality invested inward the business.
4. It has a permanent beingness inward the trouble concern to consider its long-term needs.
5. It is used for purchasing fixed assets similar land, building, plant, machinery, etc.
6. It is likewise used for purchasing intangible assets similar patents, copyrights, goodwill, etc.
7. It is required for promoting the business.
8. It is likewise required for expansion, modernization together with diversification of business.
9. Fixed working capital alphabetic quality gets depreciated every bit an property is used over fourth dimension amongst few exceptions similar inward illustration of land.
10. Fixed working capital alphabetic quality requirement is estimated past times the promoters of business. This estimation must last made every bit accurately every bit possible. To accomplish this, the promoters assay professional person assist together with direct maintain advice from experts such every bit engineers, architects, etc.

Read next articles to know to a greater extent than on the concept of fixed capital:

1. Features of fixed capital
2. Role or importance of fixed capital
3. Sources of fixed capital
4. Factors affecting fixed working capital alphabetic quality requirement

Examples of Fixed Capital

The examples of fixed working capital alphabetic quality are depicted inward the next image.

Common examples of fixed working capital alphabetic quality investments are every bit follows:

• Plant together with machinery.
• Factory's reason together with its buildings.
• Company's headquarter (HQ), administrative areas, regional together with local offices, together with their premises.
• Computing together with communication infrastructure that generally includes workstations, servers, data-storage facilities, local-area networks, the internet, telephones, fax, together with thence on.
• Patents, copyrights, goodwill, etc., likewise gets covered nether fixed capital.