SYNTHESIS OF CAPITAL TYPES
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Business concept, Businessman confuses between two choices of money. Vector illustration.
The investment capital is money and other assets to perform business investment activities.The purpose is to know when the investor intends to invest in a project, how much money they plan to spend on implementing the project. In addition, the difference between investment capital and charter capital is the limit amounts for the FDI Company to borrow medium and long-term loans.
The charter capital means the total value of assets contributed or promised to be contributed by members/partners when establishing a limited liability company or partnership; or the total value of the par value of shares already sold or registered to buy when establishing a joint-stock company. The charter capital is an amount of the limited term of the company must be returned when business loss. In this case, the members, the shareholders who contribute capital to the Company are not responsible for the business activities of the Company by personal property (except for intentional misconduct or guarantee of personal property loans).
The working capital is the difference between short-term assets and short-term liabilities. For the purpose, people with accounting majors shall answer more accurately. In the financial perspective, FUJLAW understands that the greater the working capital, the higher the ability to pay so it is convenient in business, investment, payment… because the working capital will be easy to convert into cash.
The fixed capital of an enterprise which is a part of the advance capital of a fixed asset, its characteristic is rotate gradual part in many production cycles and complete a cycle when the fixed asset run out of time. The value of the business is largely accumulated in the form of the fixed capital.
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CRITERIA |
THE WORKING CAPITAL |
THE FIXED CAPITAL |
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Characteristics |
– The working capital flows fast -The working capital shifted once in the production and business process. – The working capital completes a cycle after completing a business process. – The mobility process of the working capital is a closed cycle from one form to another and then back to the initial form with a value greater than the initial value. The mobilization cycle of working capital is the basis for assessing the solvency and efficiency of production and business, the efficiency of using the capital of the enterprise. +The biggest difference between the working capital and the fixed capital is: the fixed capital gradually transfers its value to the product through depreciation, while the working capital transfers all its value into the product value by production cycle, business. |
-The fixed capital is transferred through many periods of production and business of the enterprise due to fixed assets and long-term investments participated in many production cycles of the enterprise. -When involved in the production and business process of the enterprise, the parts of fixed capital investment in production are divided into two parts. A part of the fixed capital corresponding to the wear and tear of fixed assets transferred into the business expenses or production costs of the products or services produced, this part of the value will be offset and accrued whenever goods or services are consumed whenever goods or services are consumed. The rest of the fixed capital is in the form of the residual value of the fixed asset. |
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Expression |
Working assets |
Fixed assets |
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Show on financial statements |
The indicators of the working assets such as cash and cash equivalents, receivables… |
