What Is Fixed Capital? Definition, Pregnant As Well As Examples

Definition of Fixed Capital

In general, the definition of fixed capital tin orbit notice move stated every bit under.

“Fixed majuscule is a compulsory initial investment made past times the entrepreneur to origin upwardly the activities of his business.”

Fixed majuscule is a mandatory sometime investment made at the introductory stage of a describe organisation establishment.

Fixed majuscule is non alike working capital, which is required on a continuous reason to operate (run) the ordinary class of production in addition to distribution of goods in addition to services.

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According to Hoagland,

“Fixed majuscule is comparatively easily defined to include land, building, mechanism in addition to other assets having a relatively permanent existence.”

Fixed majuscule is a permanent investment made to run across the longer-term needs (requirements) of the describe organisation activities.

Thus, fixed majuscule has a permanent being inwards the business. It is unremarkably introduce inwards the shape of fixed assets similar land, building, plant, machinery, etc.

Meaning of Fixed Capital

The pregnant of fixed majuscule is depicted inwards the next chart.

The pregnant of fixed majuscule tin orbit notice move easily grasped from these points:

1. Fixed majuscule is a compulsory initial investment made inwards the business.
2. It helps to lay downward the basic infrastructure on which describe organisation is supposed to stand upwardly in addition to flourish inwards a long run.
3. It is a part of full majuscule invested inwards the business.
4. It has a permanent being inwards the describe organisation to run across its long-term needs.
5. It is used for purchasing fixed assets similar land, building, plant, machinery, etc.
6. It is likewise used for purchasing intangible assets similar patents, copyrights, goodwill, etc.
7. It is required for promoting the business.
8. It is likewise required for expansion, modernization in addition to diversification of business.
9. Fixed majuscule gets depreciated every bit an property is used over fourth dimension amongst few exceptions similar inwards instance of land.
10. Fixed majuscule requirement is estimated past times the promoters of business. This estimation must move made every bit accurately every bit possible. To arrive at this, the promoters attempt professional person manage in addition to direct keep advice from experts such every bit engineers, architects, etc.

Read next articles to know to a greater extent than on the concept of fixed capital:

1. Features of fixed capital
2. Role or importance of fixed capital
3. Sources of fixed capital
4. Factors affecting fixed majuscule requirement

Examples of Fixed Capital

The examples of fixed majuscule are depicted inwards the next image.

Common examples of fixed majuscule investments are every bit follows:

• Plant in addition to machinery.
• Factory's dry reason in addition to its buildings.
• Company's headquarter (HQ), administrative areas, regional in addition to local offices, in addition to their premises.
• Computing in addition to communication infrastructure that to a greater extent than oftentimes than non includes workstations, servers, data-storage facilities, local-area networks, the internet, telephones, fax, in addition to thence on.
• Patents, copyrights, goodwill, etc., likewise gets covered nether fixed capital.