What is capital ? | What do you mean by Capital?

Capital refers to the total investment of company in the term of money, and assets. It is called as total wealth of company. When company is going to invest large amount of finance into the business, it is called capital. Capital is the initial and integral part of new and existing business concern.

There are two types of capital:

Fixed Capital

Working Capital

Fixed Capital:

Fixed capital is need to meet long term or permanent purpose of business concern. Fixed capital is required mainly for purpose of meeting capital expenditure of business and it is used over a long period. It is the amount invested in various fixed or permanent assets, which are necessary for business. 

Working Capital:

Working capital is needed to meet the business day to day transaction of business. Working capital consist of various compositions of current assets such as inventory, bills, receivable, debtors, cash and bank balance and prepaid expenses. Working capital is used to purchase of raw materials, payments of wages to workers, payment of day to day expenses and maintenance expenditure etc.