Fixed Capital

Fixed capital is clearly referred to as the physical capital or a real capital which is not consumed or invested in the production of any real product.

Concept of fixed capital

The concept of fixed capital is not new in the field of economics and accounting. This term was categorized for the first time by the economist and specialist David Ricardo. The term of fixed capital can be contrasted with the term circulating capital which can be explained in terms of the raw materials. Therefore the circulation capital is used in the investments and production so that the chances of generating moiré profit are increased. On the other hand the fixed capital is the one which is kept fixed and is not used in exercising the expanses.

Investment of fixed capital

It has been mentioned already that the fixed capital is the one which is not used up or consumed. From this, it can be very clearly determined that the fixed capital is that part of the total capital which is usually invested in the purchasing of fixed assets and possessions. The investment sources of fixed capital include the buildings, land, vehicles, equipment and plants and possessions of the similar kind. In this way the amount of fixed capital remains engaged and committed in the almost on permanent basis in business. The investments of fixed capital may last for a long as one complete accounting period or even longer than that.

Major distinctions of fixed capital

There are certain distinctions made by the economists and other specialists of the field regarding the fixed capital and various other forms of capital investment. This distinction also makes the concept of fixed capital even clearer and distinguished from the circulating capital. Some relative analyses have been given by Karl Marx in this field and according to these; the rotation speeds also called as the turn over time of the capital vary with different types of the capital assets. In some cases the fixed capital also does circulates but the major difference is that the circulation time is much longer as compared to other forms of capital.