Fixed capital, everything you need to know, what is it? how is it formed?

What is fixed capital?

In the world of economic and business the term "capital" is used to all the important that it helps to generate more goods and services, it includes personnel, machinery, places and others.

According to capital economists it is a group of goods and products that help us generate more. In financial language, it is everything accumulated in money that has not been spent by its owner, that is, it has been saved and placed in the financial world; This can be through the purchase of shares, acquired goods or public funds, among others, always with the faithful purpose of having more than what was invested back.

Legally speaking it is the group of rights and assets that are your personal or legal assets.

It is important to emphasize that capital can be presented in various forms such as money in the hope that over time it will be possible to have more, a set of production goods such as a factory. In whatever case the main objective of the capital is to leave a profit

Branches into which the capital is divided

This term is divided into various types of capital.

Issued capital, which is what a particular company has given as part of its shares.
Fixed Capital, is the one that refers to the goods that companies have as part of their production process, it is important to know that these goods are not used in the short term because they are rather material or in kind.
Working CapitalIt is the opposite of the previous one, that is to say, it is the capital that can be spent while the production process is in progress but must also be returned in a short period of time.
Variable capitalThis refers to the one that is paid, as a job in other words the salary of a worker.
Constant Capital: It refers to the capital that is invested in materials, machines and other things that are needed to carry out the production process.
Financial capital. It is considered the representation of the value of money that is represented in the total assets of a society.
Private capital, makes mention of private or private entities such as companies, institutions and the difference of this is that the decision is closely linked only to a few participants who make it up or who are active members of it for having contributed an amount of money to its creation or in the same way a percentage of it has been bought in which therefore it is worthy of the rights to be able to decide on where the decision-making goes.
Physical Capital. It is everything that leads to the facilities and belongings that are used to make the products.
Floating Capital, It refers to what is equivalent to what is freely put into shares without having to keep it under control.
Human Capital. It is the total of knowledge, skills and aptitudes that people acquire and that make them capable of carrying out different activities in a productive way regardless of their level of complexity. The way in which the capital can be increased in this case is by means of an increase in payment, whether it is requested by the employee or by seeing his abilities, it is granted.
Risk capitalIt is defined as reinvesting the profit that comes from the same shares and is known as capital that lacks profit.
Social capital. It is the sum of all the entries granted together and that in the long term gives profits what we know as stockholders' equity.
Natural CapitalThey are the benefits that one has from the land or the environment, where it is invested so that the environment provides us with a diversity of products in a regulated way to protect it.
Liquid CapitalThis type of capital refers to all the benefits obtained from the company or the economic amount that is derived. LO which means that it is the percentage obtained as a profit on the investment. That is, it provides you with the resources or capital so that it can be used in the operations that best suit you.
Financial Capital, is the set of human, natural, social and manufacturing capital
Subscribed capital, variable capital that the shareholders agree to give, similar to the previous one, that is, a contribution is given to create the capital.
National Capital. It is made up of everything produced and carried out in the territory of the country and includes all the money that moves in it, the material goods produced and is a way of realizing the productive capacity of the country.

Today we will focus on talking only about fixed capital which is the one that encompasses everything that is the production process in a company and that degenerates in the long term, such as real estate machines, installations and others.

It is used in the investment language of the European Account Systems (SEC) which is as already said that it measures through statistics what real estate and other material things of companies and government are worth mainly.

There are several classes of companies designated by the LGSM general law of mercantile companies in which, for example, a public limited company means that its liability is limited by shares and others; but they can also take the form of variable capital.

Gross fixed capital formation

Gross fixed capital formation covers land redevelopment that is, as ditches, drains and fences the machinery of factories, equipment, buildings, schools, roads and others and others. Obviously you are last destined to the government represented with a capital.

This gross form of capital said is divided into 3 parts that we explain below:

Gross fixed capital formation

They are the resulting assets that are invested in production for more than one year.

This in turn is divided into 2:

Consumption of Fixed Capital that it is simply the devaluation of the values of the fixed assets that they own as a result of the simple use or habitual wear and tear or when they are no longer useful to us; This means in economic terms that a part of what is produced is going to be used directly for investment with the purpose of making a large amount of goods and services, although as months or years pass, these goods lose their value as they deteriorate, such as machinery. Then the consumption of fixed capital will depend on the time of deterioration that the goods entail and in such a way the sum of the investment made will decrease.
The net formation of fixed capital. It will be that discount that is made by subtracting that consumption from the fixed capital. In other words, the gross formation of fixed capital is what notifies us of the value of the resources required for investment; In other words, it informs us of the current economy of the changes that have been made.

What are assets and liabilities

Stock variability

This is calculated from the difference between what the entries and exits in stock are worth that cover the established time and already reduced the losses in progress of the goods that are in stock.

They are part of this:

The materials used.
Unfinished work such as animals destined to be sold as livestock and crops and those that have already been completed and will not be modified.
The purchase and sale but only if it is bought to be sold in this territory of the country.

Primarily what already exists with the exception of unfinished work: they are organized by inventories that will be available for a period of no more than one year for the tasks carried out.

Acquisitions less disposals of valuables. They are those that are not financial, that is, their main utility is not to produce or they do not devalue over time.

Investing capital is based on giving money in exchange for profits

Those who invest their money to generate higher returns and the more it is invested obviously, the greater the benefit it will have for the future.

It is very important that we emphasize that capital when invested can have a huge benefit but in the same way it can be against it, because investments have a risk that in the long run can be feasible and beneficial for our investments, but they can also represent a failure by not generating profitable profits.

For this reason, all movements must be analyzed well so that personal and joint decisions are as successful as possible as this will guarantee the success of our decisions, transforming them into more profits and greater benefits.

Remember that a company or capital with the correct and correctly directed decisions is very attractive to the eyes of the stock market. But if the opposite happens, the gains will be truncated by the bad decisions made and naturally this will be projected before the stock market. These small details will make your capital something successful and you will achieve great benefits in the investment you want to make.