What Are Features Of Fixed Capital?

What are Features of Fixed Capital?

The x of import features of fixed capital are depicted inwards the next image.

The master copy characteristics or features of fixed upper-case missive of the alphabet are listed equally follows:

1. Purchase of fixed assets.
2. Promotion together with expansion of business.
3. Low liquidity.
4. Permanent inwards nature.
5. Primary sources.
6. Amount of fixed capital.
7. Long-term needs of business.
8. Source of wealth together with risk.
9. Source of profit.
10. Appreciation together with depreciation.
11. Miscellaneous features.

Now let's speak over each characteristic of fixed upper-case missive of the alphabet i past times one.

1. Purchase of fixed assets

Fixed upper-case missive of the alphabet is capital invested inwards fixed assets. In other words, it is upper-case missive of the alphabet used for purchasing fixed assets.

The fixed assets tin dismiss live grouped nether 2 master copy categories, viz.,

1. Tangible fixed assets includes land, building, plant, machinery, etc.
2. Intangible fixed assets includes patents, copyrights, goodwill, together with hence on.

2. Promotion together with expansion of business

Fixed upper-case missive of the alphabet is required for promoting line concern together with its ancillary (supplementary) activities.

Along amongst promotion, fixed upper-case missive of the alphabet equally good helps inwards the expansion, modernization together with diversification of business.

3. Low liquidity

In general, the Definition of liquidity tin dismiss live stated equally follows:

“Anything which is easily saleable inwards the market together with gets an expected value (price) is said to live liquidable. That is, it has a liquidity.”

Low liquidity agency something, which is non easily realizable (i.e. saleable).

Fixed upper-case missive of the alphabet is used to instruct (purchase) fixed assets. These assets lead maintain a depression liquidity because they are non easily saleable.

4. Permanent inwards nature

Fixed upper-case missive of the alphabet has a long-lasting existence. It is permanent inwards nature. It cannot live withdrawn from the business. However, it tin dismiss live withdrawn solely when the line concern closes or shuts downwards (i.e. liquidates).

5. Primary sources

Primary sources of fixed upper-case missive of the alphabet are shares, debentures together with long-term loans.

In the accumulated i.e. full fixed capital,

1. The owners funds come upwards from shares.
2. The fixed borrowed funds come upwards from debentures.
3. The long-term loans are obtained from fiscal Institutions.

Of the higher upwards 3 sources, shares are the master copy rootage of fixed capital.

6. Amount of fixed capital

The total of fixed upper-case missive of the alphabet depends on the next factors:

1. Nature of business.
2. Size of fellowship or organization.
3. Location of business.
4. Business-related infrastructure facilities.
5. Methods of production.

7. Long-term needs

Fixed upper-case missive of the alphabet is used to run into the long-term needs of the line concern roughly of which are listed below.

1. Amalgamation.
2. Merger.
3. Foreign collaboration.
4. Sharing or leasing of technologies.

8. Source of wealth together with risk

Fixed upper-case missive of the alphabet is a rootage of wealth. However, it is equally good a rootage of risk. This is because it causes:

1. Depreciation of fixed assets.
2. Outflow of involvement cost.
3. Normal repairs together with maintenances.
4. Contingencies together with uncertainties attached to the business.

9. Source of profit

Profit is the departure betwixt sale cost together with cost of purchase.

Fixed assets are equally good sources of profit. These assets assist inwards earning earnings through the sale of products.

However, fixed assets cannot earn a earnings past times themselves. They accept assist of next factors of production to earn the profit:

1. Raw-materials.
2. Labour.
3. Infrastructure facilities roofing render of electricity, fuel, water, etc.

10. Appreciation together with depreciation

The important of 2 terms viz., appreciation together with depreciation are opposite to each other. Their private important is stated below.

1. Appreciation agency an increase inwards the value of an property beingness used.
2. Depreciation indicates a decrease inwards the value of an property beingness used.

Fixed assets tin dismiss undergo either an appreciation or depreciation over a menstruum of time. The value (price) of roughly fixed assets similar the world appreciate later on roughly menstruum of time. However, the value of other fixed assets such equally building, machinery, furniture, etc., depreciate later on roughly menstruum of time.

11. Miscellaneous features

Miscellaneous features of fixed upper-case missive of the alphabet are equally follows:

• Fixed upper-case missive of the alphabet improves fiscal analysis.
• It provides a long-term line concern stability.
• It helps inwards getting term loans.
• It equally good improves equity upper-case missive of the alphabet ratio.