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Question
Justify the following statement.
Fixed capital stays in the business almost permanently.
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Solution
Justification:
- Fixed capital is the capital which is used to purchase fixed assets of the business.
- These fixed assets are used for a longer period of time and are not meant for resale.
- In other words, fixed capital refers to the capital invested for acquiring fixed assets.
- 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.
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