What Are Features Of Fixed Capital?

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

1. Purchase of fixed assets.
2. Promotion together with expansion of blogspot.com//search?q=what-is-fixed-capital-definition">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 verbalise 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 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 live grouped nether 2 master copy categories, viz.,

1. Tangible fixed assets includes blogspot.com//search?q=what-is-fixed-capital-definition">land, building, plant, machinery, etc.
2. Intangible fixed assets includes patents, copyrights, goodwill, then on.

2. Promotion together with expansion of business

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

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

3. Low liquidity

In general, the Definition of liquidity tin live stated every bit follows:

“Anything which is easily saleable inwards the blogspot.com//search?q=what-is-fixed-capital-definition">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 larn (purchase) fixed assets. These assets receive got 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 It cannot live withdrawn from the business. However, it tin live withdrawn alone when the concern closes or shuts downwardly (i.e. liquidates).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 sum of fixed upper-case missive of the alphabet depends on the next factors:

1. Nature of business.
2. Size of companionship or blogspot.com//search?q=what-is-fixed-capital-definition">organization.
3. Location of business.
4. Business-related infrastructure facilities.
5. 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 encounter the long-term needs of the concern closed to of which are listed below.

1. blogspot.com//search?q=what-is-fixed-capital-definition">Amalgamation.
2. blogspot.com//search?q=what-is-fixed-capital-definition">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 besides 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 deviation betwixt sale toll together with cost of purchase.

Fixed assets are besides sources of profit. These assets aid inwards earning profits through the sale of products.

However, fixed assets cannot earn a profits past times themselves. They accept aid of next blogspot.com//search?q=what-is-fixed-capital-definition">factors of production to earn the profit:

1. Raw-materials.
2. blogspot.com//search?q=what-is-fixed-capital-definition">Labour.
3. Infrastructure facilities roofing provide of electricity, fuel, water, etc.

10. Appreciation together with depreciation

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

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

Fixed assets tin undergo either an appreciation or depreciation over a menses of time. The value (price) of closed to fixed assets similar reason appreciate afterwards closed to menses of time. However, the value of other fixed assets such every bit building, machinery, furniture, etc., depreciate afterwards closed to 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 concern stability.
• It helps inwards getting term loans.
• It besides improves equity upper-case missive of the alphabet ratio.