Fixed Capital

Some of the things a business owner needs to run operations get eaten up quickly. Buy a bag of chocolate chips for your cookie factory and that bag will be gone in a matter of seconds. Pretty soon, you’ll need another bag.

Other costs are more durable. Or, you might say, more fixed...fixed like a mountain range: wind and weather might wear it down, but only after a long time.

For the cookie operation, think about the land the factory is built on, or the buildings themselves, or the 1,000-gallon mixers that churn all the ingredients with bag after bag of chocolate chips.

These long-lasting assets are known as fixed assets. And money spent on these items gets accounted as fixed capital.