“The funds required in fixed assets remain invested in the business for a long period of time”.
Which concept is hidden in the quoted lines? Identify it and state its importance also.
The quoted lines are talking about the fixed capital.
Fixed capital is that portion of funds which is used to purchase fixed assets. In the words of BO Wheeler, fixed capital is invested in fixed or long run assets.
The following points state the importance of fixed capital
(i) With the help of this, capital acquisition of fixed assets are possible…
(ii) This capital is used for meeting the permanent needs of the company.
(iii) This capital is also used again and again to generate revenues for company.