Fixed capital is that part of the capital that is used up in the fixed assets that remain a part of business for a long time. There are various ways to obtain fixed capital or funds to invest in fixed assets. This is done mostly through long term loans. The firms turn to the capital markets to generate these long term funds. In the capital market the firms can use stocks, bonds, debentures, T-bills, foreign exchange and fixed deposits. The two basic ways to generate fixed capital are:
- Issuing debentures which are unsecured long term bonds that generate capital.
- Issuing stocks/shares that represent a source of permanent capital that will not be repaid.
