The fixed capital of the organization is part of the productive, basic capital, which is repeatedly and fully involved in the reproduction of goods. It can also include that part of the cash flows that was spent on the construction of structures, buildings, the acquisition of machinery, tools and equipment. After the goods have been sold, the fixed capital will be returned to the entrepreneur in parts. Let us consider in more detail the features of its structure, composition and functioning.
Fixed capital - cash flows that are invested in fixed assets. He changes his material form, passing a series of successive and interconnected stages:
- Investing in real assets (structures, buildings, equipment, machinery, etc.), and not in financial (bonds and shares).
- Production of goods and consumption of resources. Development of a strategy for their implementation.
- The gradual transfer of labor costs as moral and physical wear and tear on the product. For this, special cash is used - depreciation charges, which include the costs of circulation and production.
- Compensation stage when the accrued depreciation begins to turn into a monetary expression (revenue and cost). Due to these funds, equipment is again being purchased and constantly updated.
This is the structure of fixed capital. But it can vary depending on the scope of the enterprise, its policies, strategic goals and tactical objectives.
The composition of fixed capital includes:
- Fixed assets, that is, such a part of the property that is used as a means of labor in the production process, work or services. These cash flows can be used to manage the company for a certain period, which must necessarily exceed twelve months. The fixed assets also include land plots and other, which are the property of this organization. We are talking about the monetary value of public funds and values that have a long period of service.
- Long-term incomplete investments include the costs of forming and increasing their size. In addition, these include investments that were aimed at buying a system of non-current assets not intended for sale.
- Long-term investments in valuable government securities, bonds and more, as well as in the authorized capital of other organizations.
- Intangible assets, which include copyright to the result of intellectual activity. They also take into account the business reputation of the company and the system of organizational expenses (for example, related to the formation of a legal entity, registration of the authorized (joint-stock) capital, and so on).
Fixed capital also includes:
- Buildings as one of the types of funds, which include a system of architectural and construction objects. Their basic purpose is to create conditions for housing, labor and socio-cultural services for employees, as well as the preservation of material values.
- Buildings as infrastructure necessary for optimal maintenance of the production process.
- Power and working equipment and machinery is a small part of the capital used in the production of goods.
- Regulating, measuring devices and instruments, as well as computer technology.
Fixed capital should be formed in accordance with its specifics, policies and goals. However, to achieve them in the situation of the modern market, constant adjustment of this process is necessary.