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Differences Between Fixed Capital and Working Capital

What Is Capital?

What Is Fixed Capital?

What Is Working Capital?

What Is the Difference Between Fixed Capital and Working Capital?

Production processes undergo various stages before they have got enough capital to self-sustain. The situation is directly proportional to the amount of capital a business owner/entrepreneur is holding. The following table helps distinguish between fixed capital and working capital:


Fixed Capital

Working Capital


This type of capital is meant for purchasing long-term assets of an organisation spanning over several accounting periods.

Working capital investment is required for accumulating the current assets of a company spanning over less than one accounting period


Since they form the initial backbone of the production process, these come with low liquidity.

Working capital is highly liquid because the entrepreneur invests it in regular variable assets.


Fixed capital serves strategy-oriented objectives that determine its modus operandi.

Working capital serves operation objectives, and its value is dependent on factor requirements.


Permanent assets of a company include land, property, and machinery, which are constant in the short-run production process.

Short-term financing, debts, and loans form the basis for working capital.

A business cannot begin or continue its production process without capital. Despite an inherent difference between fixed capital and working capital, production is directly proportional to the overall capital usage. Entrepreneurs must ensure sufficient accumulation of both fixed and working capital to keep their business running.

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