Question
State difference between Long Term Capital and Short Term Capital.
| No. | Point of different | Long Term Capital | Short Term Capital |
| $1.$ | Meaning | The capital, which remains blocked in a business for ten years or more, is known as a long term capital. | The capital, which is required for a short period of three to five years, is known as short term capital. |
| $2.$ | Sources | This capital is raised through equity shares, preferences shares and debentures. | This capital is raised through bank loan, overdraft, public deposits or business credit. |
| $3.$ | Form (nature) | Such capital remains engaged in the form of fixed capital. | Such capital remains engaged in current assets like stock of material, debtors & tools etc. |
| $4.$ | Cash Liquidity | This capital is blocked in fixed assets and is not converted into cash. So, it has no element of cash liquidity. | This capital is invested in current assets. They are converted into cash on selling them. So, they have the element of cash liquidity. |
| $5.$ | Rate of return | As the capital is for a longer duration, the rate of return is not definite. | As the capital is for a the rate of return is definite. short duration, |
| $6.$ | Use | Capital expenditure id made from this capital. | This capital id used for day-to-day (revenue) expenditure. |
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