Question

Distinguish between sunk and floating capital. Give an example of each.

Distinguish between sunk capital and floating capital.

Differentiate between floating and sunk capital. Give an example for each.

Answer 1

	Sunk capital	Floating capital
i.	Sunk capital is one that can only be put to single use.	Floating capital is one which can be put to several uses.
ii.	e.g. a printing machine can only be put for printing.	e.g. money, fuel, electricity, steel, etc.

Answer 2

Sr. No.	Basis	Floating Capital	Sunk Capital
1.	Meaning	Capital goods that are highly versatile and can be shifted easily from one use or industry to another.	Capital goods that are highly specialised and designed for only one specific purpose or industry.
2.	Alternative Uses	Floating capital has multiple uses across different production lines.	Sunk capital has no alternative uses without losing its original value.
3.	Risk & Flexibility	Low risk, as the asset can be repurposed if the current business fails.	High risk, as the asset becomes obsolete if that specific business shuts down.
4.	Examples	Electricity/Fuel, Raw Steel, Money	A Railway Track, An Industrial Blast Furnace, A Custom-Made Printing Press