Fixed capital and working capital are two very important assets in the ongoing function of just about every type of business. Each type of capital provides different type of benefits to the company and makes it possible to continue producing goods and services that are in turn offered for sale to customers. While the fixed capital and working capital are both used to pursue a common goal, the nature of each group of assets is somewhat different.

One of the main differences between fixed capital and working capital has to do with the role of each type of asset within the business setting. Assets defined as fixed capital are those that are considered to be long-term or durable assets and can be used repeatedly over a long period of time as part of the business operation. Fixed capital assets include the physical facility owned and operated by the company, the equipment that is used in the production process, and other holdings that are used daily to allow the business to operate. Assets of this type can be used for years before there is a need to replace them.

By contrast, working capital has to do with assets that are acquired and then utilized in the business operation in a short period of time. This would include cash that flows into the business from different sources and is used to buy raw materials, manage debt, and in general honor the obligations that the company makes as part of the overall operation. With this in mind, the difference between fixed capital and working capital becomes more clear, with one related to assets that provide benefit for a long time, and the other having to do with assets that are constantly being received and just as rapidly being consumed as part of the business effort.

Most companies require both fixed capital and working capital in order to function. Even if a business operates with the use of space leased as a base of operations, there is a good chance the company will still own some equipment that is essential to the ongoing function of the operation. At the same time, a steady flow of cash from the sale of goods and services, business loans, and business lines of credit make it possible to cover the day-to-day expenses of the operation and promote the generation of future revenues. Keeping an ongoing inventory of both fixed capital and working capital, and managing both types of capital properly will go a long way in making sure the business is able to grow and thrive for many years.