How Many Kinds Are There Of Finance?

There are two kinds of finance or capital requirements of a business. First, there is the capital which is required by a business to own durable assets such as building, land, machinery, etc. this capital is called fixed capital. Secondly,  capital is required in investment in short terms assets such as purchase of raw material, payment of salaries, wages, rent, etc. this capital termed as current or working capital.

Fixed capital as the name signifies is the fund which is used for meeting the permanent or long term needs of the business. Before a business is carried out, the long term needs of a business are land, building and equipment and other sundry expenses, such as fees, commission, insurance, furniture, vehicles etc. The field capital requirements of a business also depend upon its size and type of a business: sole trader ship, partnership or a company. The larger size of the business, the heavier is the investment in fixed assets and vice versa.

The circulating capital required by a firm depends upon a number of factors such as nature of business, rapidity of turn over period, length of period of manufacture, etc. in retailing services, for instance, the working capital can be rapidly covered by the scale of goods. The requirements of working capital are, therefore, rather small in this business. A manufacturing concern, on the other hand, has a slower turnover of circulating capital.