Fixed capital

Fixed capital, non-current assets, fixed assets are those assets of the company that have a condition for long-term use, such as land, patents, investments and the like.

Fixed capital

That is, it includes all the assets of the company that do not deteriorate, expire or expire in less than one year. They must remain in balance for more than one business cycle.

What is it for

This capital’s main mission is to sustain the main activity of the company over time, since the absence of it could make it difficult or even impossible to function properly. This may vary depending on the sector, since although a building is an essential fixed asset (or capital) in the hospitality business, it is not in the same way in the communication sector.

Thus, depending on the fixed capital that we analyze and the sector we are targeting, this will have a greater or lesser relevance in the ordinary activity of the company.

Types of fixed capital

Fixed capital can be broken down into three large groups:

  • Tangible fixed assets: It is made up of tangible assets such as buildings, land, machinery, computer equipment, etc.
  • Intangible assets: They are mainly grouped into industrial property, intellectual property, copyrights, patents, business software, etc.
  • Long-term investments: Consists of the sum of all those investments that have a maturity date greater than one year.

The complete list of tangible and intangible assets of a company can be consulted in the chart of accounts of the corresponding country.

Practical examples of fixed capital

Below we are going to put 3 examples of fixed capital that have a greater or lesser relevance depending on the business sector:

1. Tangible fixed assets: land and buildings.

  • On the one hand, the deterioration or lack of these will have a greater impact on companies dedicated to tourism, various services (hairdressing, massages, aesthetics …) or leisure.
  • On the other hand, companies that would not excessively accuse the impact of not owning buildings or land would be those that could carry out their activity digitally. Examples are banking, advisory services or management.

2. Intangible assets: software and patents.

  • The companies that would see a reduction in the production or performance of services are, for example, those related to the media or marketing of computer equipment.
  • On the other hand, sectors that can survive in better conditions if said assets or fixed capital are lacking are those that mostly group the primary sector, such as fishing, agriculture or livestock.

3. Long-term investments: loans and financial operations in favor.

  • Banking entities and financial services companies would undoubtedly be the biggest losers in this case.
  • However, businesses that do not have a great weight on the balance sheet in investments will suffer less from the consequences of their deterioration or loss of value.