Question

Justify the following statement.

Fixed capital stays in the business almost permanently.

Answer 1

Justification:

1. Fixed capital is the capital which is used to purchase fixed assets of the business.
2. These fixed assets are used for a longer period of time and are not meant for resale.
3. In other words, fixed capital refers to the capital invested for acquiring fixed assets.
4. Examples of fixed capital are capital used for purchasing land and building, furniture, plant and machinery etc. Hence, fixed capital stays in the business almost permanently.