Explain the following term / concept : Fixed capital

Answer: Fixed capital is the capital invested in fixed (long-term) assets of a business such as land, buildings, plant and machinery, furniture and long-term investments.

• It is needed for the acquisition of assets that are used for a long period to produce goods and services.
• It is invested for a long time and is not meant for resale, so it is blocked in the business.
• Its amount depends on the nature and size of the business; manufacturing and public utility concerns need more fixed capital than trading concerns.
• It is raised from long-term sources such as shares, debentures, retained earnings and long-term loans.