- Asset Accounts
- Assets in Accounting
- Total Assets
- Total Assets Formula
- Fixed Assets
- Fully Depreciated Assets
- List of Assets
- Types of Assets
- Examples of Assets
- Net Assets
- Book Value of Asset
- Fixed Assets Accounting
- Net Asset Formula
- Assets Formula
- Net Fixed Assets
- Property Plant and Equipment (PP&E)
- Cash and Cash Equivalents | Examples, List & Top Differences
- Cash Equivalents
- Restricted Cash
- Inventories List
- 3 Types of Inventory | Raw Material | WIP | Finished Goods
- WIP Inventory (Work-in-Progress)
- Raw Material Inventory
- Lower of Cost or Market
- Inventory Write-Down
- Periodic Inventory System
- Ending Inventory Formula
- Average Inventory Formula
- Closing Stock
- Carrying Amount
- Carrying Value
- Inventory vs Stock
- Is Inventory a Current Asset?
- Current Assets
- Short Term Investments on Balance Sheet
- Current Assets vs Non-Current Assets
- Current Assets Examples
- Current Assets List
- Current Assets Formula
- Other Current Assets
- Short Term Assets
- Assets Revaluation
- FIFO vs LIFO
- First In First Out (FIFO)
- Last in First Out (LIFO)
- LIFO Reserve
- LIFO Liquidation
- Non-Current Assets
- Accounts Receivables? | Definition, Accounting Examples
- Is Account Receivable - An Asset or Liability?
- Accounts Receivable Examples
- Accounts Receivable Process
- Is Accounts Receivable an Asset?
- Accounts Receivable - Debit or Credit?
- Accounts Receivables Factoring
- Recourse in Factoring
- Accounts Receivable Financing
- Accounts Receivable Journal Entry
- Net Realizable Value Formula
- Trade Receivables
- Net Realizable Value (NRV)
- Allowance for Doubtful Accounts
- Accrued Revenue
- Accrued Revenue Examples
- Deferred Revenue Expenditure
- Deferred Revenue Examples
- Liquid Assets
- Liquid Assets Examples
- Financial Assets
- Financial Assets Examples
- Financial Assets Types
- Quick Assets
- Marketable Securities on the Balance Sheet | Top Examples
- Marketable Securities Examples
- Non-Marketable Securities
- Trading Securities in Balance Sheet
- Prepaid Expenses
- Prepaid Expense Examples
- Prepaid Insurance
- Intangible Assets List
- Tangible vs Intangible Assets
- Net Tangible Assets
- Tangible vs Intangible
- Contingent Asset
- Tangible Assets
- Deferred Tax
- Deferred Income Tax
- Deferred Tax Assets
- Capital Expenditure (Capex)
- Capex Calculation
- Capital Expenditure Examples
- Capex vs Opex
- Salvage Value
- Residual Value
- Working Capital Management Importance
- Working Capital Examples
- Working Capital Loan
- Fixed Capital vs Working Capital | Top 8 Differences (Infographics)
- Impariment of Assets
- Goodwill Formula
- Goodwill Amortization
- Goodwill Impairment Test
- Intangible Assets
- Intangible Assets Examples
- Negative Goodwill
- Goodwill Valuation
- Capitalized Interest
- Accounting Basics (80+)
- Bookkeeping (52+)
- Balance Sheet (30+)
- Liabilities (68+)
- Shareholders Equity (91+)
- Income Statement (158+)
- Cash Flow Statement (17+)
- Accounting Careers (27+)
- Accounting Books (8+)
- Budgeting in Finance (31+)
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.
4.9 (1,067 ratings)
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 –