- Learn Basic Accounting in Less than 1 Hour!
- Accounting Basics
- What are Accounting Principles | List of Top Accounting Principles
- Accounting Cycle
- Accrual Accounting Basis | Top Examples | Advantages Disadvantages
- Cash Basis Accounting
- Matching Principle of Accounting
- Conservatism Principle of Accounting
- Cash Accounting | Top Examples | Advantages & Disadvantages
- What are Accounting Policies? | Top Examples | Significance
- Accounting Estimates
- Cash Accounting vs Accrual Accounting | Top 9 Differences
- Operating Cycle
- Fiscal Year vs Calendar Year | Top Differences | Examples |
- Debit vs Credit in Accounting
- Double Entry Accounting System
- Journal in Accounting
- Ledger in Accounting
- Journal vs Ledger
- What is Trial Balance ? | Examples | Steps | Prepare | Errors
- Reconciliation of Books | Types, Best Practices | Useful Tips
- Petty Cash | Meaning | Template | Accounting | Example
- Debit Note | Debit Notes Accounting & its Top Characteristics
- Credit Note
- Debit Note vs Credit Note | Top 7 Differences (Infographics)
- Balance Sheet
- Balance Sheet
- Accounting Equation
- Assets vs Liabilities | Top 9 Differences (with Infographics)
- Trial Balance vs Balance Sheet | Top 10 Differences You Must Know!
- Revenue Reserve vs Capital Reserve | Top 7 Differences
- Capital Receipts vs Revenue Receipts | Top 8 Differences
- Capital Lease vs Operating Lease | Top Differences You Must Know!
- Debt vs Equity Financing | Advantages | Disadvantages | Example
- Internal vs External Financing | Top 7 Differences (Infographics)
- Cash and Cash Equivalents | Examples, List & Top Differences
- Cash Equivalents
- 3 Types of Inventory | Raw Material | WIP | Finished Goods
- Current Assets
- Non-Current Assets
- Accounts Receivables? | Definition, Accounting Examples
- Accrued Revenue
- Liquid Assets
- Marketable Securities on the Balance Sheet | Top Examples
- Prepaid Expenses
- Tangible vs Intangible Assets
- Net Tangible Assets | Calculate Net Tangible Assets Per Share
- Tangible Assets
- Salvage Value
- Fixed Capital vs Working Capital | Top 8 Differences (Infographics)
- Accounts Payable | Days Payable Outstanding | Formula |
- Current Liabilities | List of Current Liabilities on Balance Sheet
- Accrued Liabilities
- Notes Payable
- Deferred Expenses
- Unearned Revenue (Sales)
- Deferred Revenue (Income)
- Current Portion of Long-Term Debt (CPLTD) | Balance Sheet
- Long-Term Debt in Balance Sheet
- Financial Liabilities | Definition, Types, Ratios, Examples
- Long-Term Liabilities
- Accounts Receivable vs Accounts Payable
- Shareholders Equity
- Shareholders Equity Statement
- Par Value of Stock
- Share Capital
- Outstanding Shares (Definition, Formula) | Stocks Outstanding
- Additional Paid-in Capital on Balance Sheet
- Retained Earnings (Formula, Examples) | How to Calculate?
- How to Calculate Net Worth of a Company | Formula | Top Examples
- Shareholder Equity vs Net Worth | Top 5 Differences You Must Know!
- Common Stock vs Preferred Stock | Top 8 Differences You Must Know
- Stock vs Option
- Stock vs Mutual Funds
- Income Statement
- Income Statement | Top Examples | Template | Format | Analysis
- Cost of Goods Sold
- Direct Costs
- Indirect Costs
- EBIT vs EBITDA | Top Differences | Examples | Calculation
- Depreciation – Formula | Types | Most Comprehensive Guide
- EBITDA vs Operating Income
- Straight Line Depreciation Method
- Unrealized Gains (Losses)
- Non Cash Expense
- Interest vs Dividend | Top 9 Differences (with Infographics)
- EBITDA vs Net Income
- EBIT vs Net Income
- EBIT vs Operating Income
- Accounting Profit vs Economic Profit
- Income Tax vs Payroll Tax
- Gross Income vs Net Income
- Profit vs Revenue
- Revenue vs Earnings
- Revenue vs Income
- Profit vs Income
- Revenue vs Sales
- Income Statement vs Balance Sheet | Top 5 Differences You Must Know!
- Statement of Comprehensive Income | Items | Colgate Example
- Cash Flow Statement
- Cash flow from Operations | Formula, Calculations & Examples
- Cash Flow from Investing Activities (Formula & Top Examples)
- Cash Flow From Financing Activities | Formula & Calculations
- Fund Flow Statement
- Direct vs Indirect Cash Flow Methods
- Cash flow vs Net Income | Key Differences & Top Examples
- Cash Flow vs Fund Flow | Top 8 Differences (with Infographics)
Differences Between Fixed Capital and Working Capital
Capital is the most important ingredient in any business. Without capital, no business can be run and no business can exist.
Capital can be categorized in two forms – fixed capital and working capital.
Fixed capital is used to acquire non-current assets which would serve the business for more than one accounting period.
On the other hand, working capital is used to serve the business on day-to-day basis fulfilling the requirement of everyday production and operation.
In this article, we will look at each of them separately and would also look at a comparative analysis between them.
Without any do, let’s get started.
Fixed Capital vs Working Capital Infographics
There are many differences between fixed capital and working capital. Let’s have a look at them one by one –
Fixed Capital vs Working Capital – Key differences
The key differences between fixed capital vs working capital are as follows –
- Fixed capital supports the business indirectly. Working capital supports the business directly.
- Fixed capital is invested in long-term assets. Working capital is invested in current assets.
- Fixed capital is required before the business starts. Working capital is required after the business gets started.
- Fixed capital can’t be liquidated into cash immediately. Working capital can be liquidated into cash immediately.
- Fixed capital serves the business for a very long period of time. Working capital serves the business for a very short period of time.
- The orientation of fixed capital is strategic. The orientation of working capital is operational.
Fixed Capital vs Working Capital (Comparison Table)
Below is the comparison of Fixed Capital and Working Capital
|Basis for Comparison – Fixed Capital vs Working Capital||Fixed Capital||Working Capital|
|1. Meaning||Fixed capital is the investments done by the business for accruing long-term benefits.||Working capital is the daily requirement pumped into the business.|
|2. Acquiring types of assets||Fixed capital is used to acquire non-current assets of the company.||Working capital is used to acquire the current assets of the company.|
|3. How liquid it is?||Not at all liquid.||Very much liquid.|
|4. Conversion||Can’t be converted into cash or kind immediately.||Can be converted into cash or kind immediately.|
|5. Term – Fixed Capital vs working capital||Serves the business for a long period of time.||Serves the business for a very short period of time.|
|6. Accounting period||Offers benefits for more than one accounting period.||Offers benefits for less than one accounting period.|
|8. Consumption||Doesn’t directly get consumed by the business but serves the business indirectly.||Business needs working capital to operate.|
Conclusion – Fixed Capital vs Working Capital
Fixed capital and working capital, both are imperative for a business to run and perpetuate. And it’s not right to say that one is more important than the other.
However, without fixed capital, it’s impossible to start a business. And after the business gets started, without working capital it’s impossible to run a business.
Every business, thus, needs to take special care of fixed capital and working capital. But it is equally important to invest in the right assets so that the business can get benefits from the assets and can make use of them on regular basis.
This has been a comparison of Working Capital vs Fixed Capital, its top 8 differences along with infographics and comparison charts. You may also look at these recommended articles for further readings –
- Reporting of Non-Current Assets in the Balance Sheet
- Current Assets | Examples | Calculation
- Assets vs Liabilities | Top 9 Differences
- FIFO vs LIFO | Examples
- Capital Receipts vs Revenue Receipts
- Investment Banking vs Equity Research