What are Features of Fixed Capital?
The 10 of import features of blogspot.com//search?q=what-is-fixed-capital-definition">fixed capital are depicted inwards the next image.
The primary characteristics or features of fixed upper-case missive of the alphabet are listed every bit follows:
- Purchase of fixed assets.
- Promotion as well as expansion of blogspot.com//search?q=what-is-fixed-capital-definition">business.
- Low liquidity.
- Permanent inwards nature.
- Primary sources.
- Amount of fixed capital.
- Long-term needs of business.
- Source of wealth as well as risk.
- Source of profit.
- Appreciation as well as depreciation.
- Miscellaneous features.
Now let's verbalise over each characteristic of fixed upper-case missive of the alphabet 1 past times one.
1. Purchase of fixed assets
Fixed upper-case missive of the alphabet is blogspot.com//search?q=what-is-fixed-capital-definition">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 flame live grouped nether 2 primary categories, viz.,
- Tangible fixed assets includes blogspot.com//search?q=what-is-fixed-capital-definition">land, building, plant, machinery, etc.
- Intangible fixed assets includes patents, copyrights, goodwill, as well as then on.
2. Promotion as well as expansion of business
Fixed upper-case missive of the alphabet is required for promoting trouble organisation as well as its ancillary (supplementary) activities.
Along amongst promotion, fixed upper-case missive of the alphabet every bit good helps inwards the expansion, modernization as well as diversification of business.
3. Low liquidity
In general, the Definition of liquidity tin flame live stated every bit follows:
“Anything which is easily saleable inwards the blogspot.com//search?q=what-is-fixed-capital-definition">market as well as 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 larn (purchase) fixed assets. These assets guide 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 It cannot live withdrawn from the business. However, it tin flame live withdrawn solely when the trouble organisation closes or shuts downwards (i.e. liquidates).
5. Primary sources
Primary sources of fixed upper-case missive of the alphabet are shares, debentures as well as long-term loans.
In the accumulated i.e. full fixed capital,
- The owners funds come upward from shares.
- The fixed borrowed funds come upward from debentures.
- The long-term loans are obtained from fiscal Institutions.
Of the to a higher house iii sources, shares are the primary origin of fixed capital.
6. Amount of fixed capital
The sum of fixed upper-case missive of the alphabet depends on the next factors:
- Nature of business.
- Size of companionship or blogspot.com//search?q=what-is-fixed-capital-definition">organization.
- Location of business.
- Business-related infrastructure facilities.
- Methods of blogspot.com//search?q=what-is-fixed-capital-definition">production.
7. Long-term needs
Fixed upper-case missive of the alphabet is used to run across the long-term needs of the trouble organisation about of which are listed below.
- blogspot.com//search?q=what-is-fixed-capital-definition">Amalgamation.
- blogspot.com//search?q=what-is-fixed-capital-definition">Merger.
- Foreign collaboration.
- Sharing or leasing of technologies.
8. Source of wealth as well as risk
Fixed upper-case missive of the alphabet is a origin of wealth. However, it is every bit good a origin of risk. This is because it causes:
- Depreciation of fixed assets.
- Outflow of involvement cost.
- Normal repairs as well as maintenances.
- Contingencies as well as uncertainties attached to the business.
9. Source of profit
Profit is the divergence betwixt sale cost as well as cost of purchase.
Fixed assets are every bit good sources of profit. These assets assist inwards earning net through the sale of products.
However, fixed assets cannot earn a net past times themselves. They guide maintain assist of next blogspot.com//search?q=what-is-fixed-capital-definition">factors of production to earn the profit:
- Raw-materials.
- blogspot.com//search?q=what-is-fixed-capital-definition">Labour.
- Infrastructure facilities roofing provide of electricity, fuel, water, etc.
10. Appreciation as well as depreciation
The pregnant of 2 terms viz., appreciation as well as depreciation are opposite to each other. Their private pregnant is stated below.
- Appreciation agency an growth inwards the value of an property beingness used.
- Depreciation indicates a decrease inwards the value of an property beingness used.
Fixed assets tin flame undergo either an appreciation or depreciation over a menses of time. The value (price) of about fixed assets similar reason appreciate subsequently about menses of time. However, the value of other fixed assets such every bit building, machinery, furniture, etc., depreciate subsequently about menses of time.
11. Miscellaneous features
Miscellaneous features of fixed upper-case missive of the alphabet are every bit follows:
- Fixed upper-case missive of the alphabet improves fiscal analysis.
- It provides a long-term trouble organisation stability.
- It helps inwards getting term loans.
- It every bit good improves equity upper-case missive of the alphabet ratio.
