What is fixed capital?

What is fixed capital?

• A. The amount you receive or pay
• B. The cash in the business bank account
• C. The total inventory value
• D. The value of intangible assets only

Answer: (A)

Fixed capital is the value tied up in long‑term productive assets that a business uses to produce goods or services. These are durable, tangible assets—things like land, buildings, machinery, and equipment—that stay in use for more than one year and enable ongoing production. This concept differentiates from cash in the bank (which is working capital used for day‑to‑day operations) and from inventory (current assets that are stocked for sale). It also isn’t limited to intangible assets, which can be part of a business’s overall value but aren’t the same as the long‑term physical assets that constitute fixed capital. So fixed capital focuses on the long‑term, durable assets that support production over time, not the day‑to‑day cash flows.

Fixed capital is the value tied up in long‑term productive assets that a business uses to produce goods or services. These are durable, tangible assets—things like land, buildings, machinery, and equipment—that stay in use for more than one year and enable ongoing production. This concept differentiates from cash in the bank (which is working capital used for day‑to‑day operations) and from inventory (current assets that are stocked for sale). It also isn’t limited to intangible assets, which can be part of a business’s overall value but aren’t the same as the long‑term physical assets that constitute fixed capital. So fixed capital focuses on the long‑term, durable assets that support production over time, not the day‑to‑day cash flows.