Question

Distinguish between Fixed Capital and Working Capital. 

Answer 1

Fixed Capital and Working Capital. 

Sr. No.	Fixed capital	working capital
Meaning
1	Fixed capital is the protion of total capital which is invested in fixed assets such as land, building equipments, machinery etc.	Working cpatial refers to a firm's investment in short term assets such as cash, short term securities, account receivable and inventories.
Nature
2.	It may be held in business for 5,10,20 years or more	It remains in the business for a short period of time and circulates into the business.
Purpose
3.	Fixed capital is invested in long term assets for the growth and expansion of a firm	It is invested in short term assets to fulfill working capital needs.
Sources
4.	It  is generated by issuing shares, debentures, borrowing of loans etc.	It is accumulated through trade credits, short term loans, public deposits etc.
Objective
5.	Investors invest their money in fixed capital for better future returns.	investors invest in working capital for immediate returns.
Risks involved
6.	Risk involved in the investment of fixed capital is high	Risk involved in the investment of working capital is low as compared to fixed capital.
Authority
7.	Generally, Top level management decides on matters related to fixed capital investment.	Middle level or lower level managers can decide on matters related to working capital needs.
Factors Affecting
8.	Need of fixed capital depends upon various factors such as: related to fixed capital investment	Need of working capital depends upon various factors such as: seasonal fluctuation, production cycle, requirement of cash etc.