Differentiate between fixed and working capital.
How is it an important factor of production?
- Fixed Capital is the capital which is invested by the company in procuring the fixed assets required for the working of the business.
- Fixed capital is required for a longer period of time.
- In fixed capital, if we do not have to buy inputs again and again, it saves our money.
- For example- capital requirement for the purchase of machinery, tools, etc.
- Working capital is the capital which is required by the company for the purpose of financing its day to day operations.
- Working capital is required for a shorter period of time.
- In working capital we need to buy the inputs gain and again, therefore more money is required.
- For example- capital requirement for the purchase of raw material.