Sources of fixed and working capitals can be found in the accounts of a company. A fixed capital is an accounting term that refers to fixed assets. If you were looking at a business, the fixed assets of that business will be possessions that have value and money from the company invested in them but they are invested in in an almost permanent manor. These can sometimes include;
Business premises.
Vehicles such as vans and company cars.
Computers that are used by the company - this does not include rented computers.
What is fixed capital in real terms?
This fixed capital is money that the company possesses but does not have in cash. This can be tapped into by the sale of these fixed asset items but usually, fixed asset items are vital for the running of businesses.
Working capital
Working capital is completely different from fixed capital and it has a different relevance when looking at a business. Working capital is the moment on a balance sheet that is constantly moving. These are all short term investments and the money is said to be working in the way that it is generating more money and more capital to be put back into the business.
Examples of working capital are;
Investments into stock.
Purchasing items for the company - things that can be sold and the company still be able to function.
Wages to staff.
Although wages to staff is a grey area, this payment will be returned by their hard work which will generate cash into the business.
Relevance in banking
When looking to see if a business in eligible for a loan, banks and lenders look at working capital the most and work out whether the amount currently allocated to working capital is likely to produce the return needed to secure funding or a loan.
Fixed capital is the fund which is required for the purchase of those assets that are to be used and over a long period. Such assets are land, building machinery, payments rights, copy rights and other overheads expenses. These expenses are born regardless of the number of unit's produced. Fixed capitals are thus, thus funds which are required not only for the purchase of fixed assets but also non current assets at the start of business like copy right, registration etc.
The main factors which determine the requirements of fixed capital in a business are: Nature of business:Nature of business the amount of fixed capital in a business. Huge fixed investment is required in public enterprise such as railways, electricity, sewerage system etc.
Manufacturing concerns also need sizeable amount of fixed capital. Trading and financial firm's needs less fixed capital. They require more working to invest in current assets. Sizeable of business:Capital required by a business depends upon its size. Generally, the larger the size of business, the greater is the need of capital and vice versa. Type of business:
If an industry is capital intensive, like iron and steel industry, a large amount of fixed capital is required in them. In labor intensive industries, lesser amount of fixed capital is needed.
Fixed capital and working capital requirements are usually fulfilled by raising money by issuing short term and long term debt securities. Usually the working capital needs are on the current basis which are financed by issuing short term notes, commercial papers, selling or buying t-bills etc. The fixed capital sources include long term debt securities such as T-bonds, corporate bonds, municipal bonds etc. The sources of working capital can come from both debt issuance as well as from stock issuance.
A figure of cases exists where states or additional entities have multiple capitals, and there are also more than a few states that have no capital. In others, the "effective" and "official" proceeds may differ for realistic reasons, resulting in a state where a city acknowledged as "the capital" is not, in fact, host to the seat of government. Likewise, sporadically the official "capital" as called may be host to the seat of path, but is not for ever and a day the geographic origin of political decision-making.
Seats of control in major sub-state jurisdictions are often called "capitals", but this is typically the case only in countries with some degree of federalism, where major sub state jurisdictions have an element of sovereignty. In unitary states, "administrative center" or other like terms are typically used. For example, the seat of government in a state of the United States of America is usually called its "capital", but the major city in a region of England is typically not. At lower administrative subdivisions, terms such as county town, county seat, or borough settle are usually worn.
