{"id":2426,"date":"2025-05-01T20:07:13","date_gmt":"2025-05-01T14:37:13","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=2426"},"modified":"2025-05-01T20:07:14","modified_gmt":"2025-05-01T14:37:14","slug":"q-with-reference-to-physical-capital-in-indian-economy-consider-the-following-pairs","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-with-reference-to-physical-capital-in-indian-economy-consider-the-following-pairs","title":{"rendered":"Q. With reference to physical capital in Indian economy, consider the following pairs :"},"content":{"rendered":"\n
<\/td>Items  <\/strong><\/td>Category<\/strong><\/td><\/tr>
1. <\/td>Farmer\u2019s plough <\/td>Working capital<\/td><\/tr>
2. <\/td>Computer <\/td>Fixed capital<\/td><\/tr>
3.<\/td>Yarn used by the weaver <\/td>Fixed capital<\/td><\/tr>
4. <\/td>Petrol <\/td>Working capital<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

How many of the above pairs are correctly matched?<\/p>\n\n\n\n

    \n
  • Only one<\/li>\n\n\n\n
  • Only two<\/strong><\/li>\n\n\n\n
  • Only three<\/li>\n\n\n\n
  • All four<\/li>\n<\/ul>\n\n\n\n
    \n

    Answer: (b) Only two<\/strong><\/p>\n<\/blockquote>\n\n\n\n

      \n
    • A\u00a0farmer\u2019s plough is considered fixed capital<\/strong>\u00a0because it is a long-term asset used over many planting seasons.<\/li>\n\n\n\n
    • A\u00a0computer is considered fixed capital<\/strong>\u00a0because it is a durable good used in the production process over several years.<\/li>\n\n\n\n
    • Yarn\u00a0<\/strong>used by the weaver is considered\u00a0working capital<\/strong>\u00a0because it is used up in the production process to make fabrics.<\/li>\n\n\n\n
    • Petrol\u00a0<\/strong>is considered\u00a0working capital\u00a0<\/strong>because it is consumed in the production process and needs to be replenished regularly.<\/li>\n<\/ul>\n\n\n\n
      Fixed Capital<\/h5>\n\n\n\n
        \n
      • Fixed capital refers to\u00a0long-term investments that help businesses generate revenue over time<\/strong>.<\/li>\n\n\n\n
      • These assets are\u00a0not consumed or sold within the operating cycle but are essential for business operations<\/strong>. Companies allocate fixed capital for acquiring physical assets, upgrading infrastructure, or implementing advanced technology that provides long-term value.<\/li>\n\n\n\n
      • Examples of Fixed Capital:<\/strong>\n
          \n
        • Manufacturing Equipment:\u00a0<\/strong>A car manufacturing company investing in automated robotic arms and conveyor belts to improve efficiency and production speed.<\/li>\n\n\n\n
        • Real Estate:<\/strong>\u00a0A retail chain purchasing commercial properties for stores or warehouses to expand operations and ensure long-term stability.<\/li>\n\n\n\n
        • Technology Infrastructure:\u00a0<\/strong>A software company investing in high-performance servers, cloud computing systems, and cybersecurity measures to enhance operational efficiency.<\/li>\n\n\n\n
        • Vehicles<\/strong>: A logistics company purchasing a fleet of delivery trucks to streamline supply chain management and reduce transportation costs.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
        • Key Characteristics of Fixed Capital<\/strong>:\n
            \n
          • Long-term Investment\u00a0<\/strong>\u2013 Fixed capital is allocated for durable assets that contribute to business growth over several years.<\/li>\n\n\n\n
          • Depreciation Applies<\/strong>\u00a0\u2013 Fixed assets lose value over time due to wear and tear, requiring companies to account for depreciation in financial statements.<\/li>\n\n\n\n
          • Not Easily Liquidated\u00a0<\/strong>\u2013 These assets cannot be quickly converted into cash, making fixed capital a long-term commitment.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n
            Working Capital<\/h5>\n\n\n\n
              \n
            • Working capital is the\u00a0capital needed for day-to-day business operations<\/strong>.<\/li>\n\n\n\n
            • It represents the\u00a0difference between a company\u2019s current assets (cash, accounts receivable, inventory) and current liabilities (short-term debt, accounts payable)<\/strong>. A healthy working capital ensures smooth business operations, timely payments to vendors and employees, and sufficient cash flow to handle unexpected expenses.<\/li>\n\n\n\n
            • Examples of Working Capital<\/strong>:\n
                \n
              • Raw Materials:<\/strong>\u00a0A clothing brand purchasing high-quality fabric and dyes to manufacture garments, ensuring continuous production.<\/li>\n\n\n\n
              • Salaries:<\/strong>\u00a0Monthly payroll payments to employees, ensuring workforce motivation and productivity.<\/li>\n\n\n\n
              • Utility Bills:<\/strong>\u00a0Covering electricity, internet, and water bills required for business operations, maintaining seamless workflow.<\/li>\n\n\n\n
              • Short-term Debt Payments:<\/strong>\u00a0Repaying business loans or credit lines that finance immediate operational needs and prevent financial bottlenecks.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
              • Key Characteristics of Working Capital<\/strong>:\n
                  \n
                • Short-term in Nature<\/strong>\u00a0\u2013 Working capital is used to cover immediate expenses and keep the business running efficiently.<\/li>\n\n\n\n
                • Highly Liquid<\/strong>\u00a0\u2013 Unlike fixed capital, working capital consists of assets that can be quickly converted into cash.<\/li>\n\n\n\n
                • Directly Impacts Cash Flow<\/strong>\u00a0\u2013 A positive working capital ensures smooth operations, while a deficit can lead to financial distress.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n
                  Fixed Capital vs. Working Capital<\/h6>\n\n\n\n
                  Feature<\/strong><\/th>Fixed Capital<\/strong><\/th>Working Capital<\/strong><\/th><\/tr><\/thead>
                  Definition<\/strong><\/td>Long-term investment in business assets<\/td>Funds used for daily operations<\/td><\/tr>
                  Timeframe<\/strong><\/td>Used over several years<\/td>Used within a short-term cycle<\/td><\/tr>
                  Liquidity<\/strong><\/td>Low liquidity<\/td>High liquidity<\/td><\/tr>
                  Examples<\/strong><\/td>Machinery, land, office buildings<\/td>Salaries, rent, raw materials<\/td><\/tr>
                  Financial Impact<\/strong><\/td>Supports business growth and expansion<\/td>Ensures smooth day-to-day operations<\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"

                  Items   Category 1.  Farmer\u2019s plough  Working capital 2.  Computer  Fixed capital 3. Yarn used by the weaver  Fixed capital 4.  Petrol  Working capital How many of the above pairs are correctly matched? Answer: (b) Only two Fixed Capital Working Capital Fixed Capital vs. Working Capital Feature Fixed Capital Working Capital Definition Long-term investment in business…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[49],"class_list":["post-2426","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-49"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":49,"label":"2024"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/2426","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=2426"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/2426\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=2426"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=2426"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=2426"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=2426"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}