Capital Required in Business is of 2 types
1.Fixed Capital
2. Working Capital
Fixed Capital means
Capital or Money required for Fixed Assets of Company
Example :- Owner's Capital,Profit and Long Term Loans
Working Capital means
Capital or Money required for Routine Day to Day Operations of Business
How to Calculate Working Capital
Working Capital =Total Current Assets-Total Current Liabilities
Example
Following is Balance Sheet of Company
| Liability | Amount | Asset | Amount |
| Capital | 10000 | Fixed Assets | 100000 |
| Reserves | 20000 | Less | |
| Secured Loan | 80000 | Dep | 20000 |
| Unsecured Loan | 20000 | Net Amount | 80000 |
| Current Liabilities | Current Assets | ||
| Sundry Creditors | 30000 | Debtors | 60000 |
| Bank OD | 10000 | Cash and Bank | 30000 |
| Total | 170000 | Total | 170000 |
Calculate Fixed Capital and Working Capital?
View AnswerFixed Capital =Capital+Reserves+Long Term Loans=10000+20000+80000+20000=130000
Working Capital=
Total Current Assets-Total Current Liabilities
=(60000+30000)-(30000+10000)
=90000-40000
=50000
