Question

Raw material and money in hand are called ___________
A) Physical capital
B) Fixed capital
C) Working Capital
D) None of them

Answer 1

Hint: Capital is a large sum of money that you use to start a business, or which you invest in order to make more money. The difference between current assets and current liabilities is used to calculate it. It is also called the current capital.

Complete answer:
Raw material and money in hand means -
Working capital includes raw supplies, inventory, and money that must be utilized to pay workers' wages and meet day-to-day expenses. They are referred to as working capital since they are depleted after single usage or change form when they are used.

Let us analyze the given options:
Option A) Physical capital: The tangible assets or inputs developed by humans that are utilized to support the creation of products and services are referred to as physical capital. In both classical and neoclassical economics, it is one of the most important factors of production. Machinery, buildings, vehicles, and equipment are examples of physical capital. Hence, this option is incorrect.

Option B) Fixed capital: The stock of tangible, long-term fixed assets held or used by resident firms for more than a year is referred to as fixed capital. Plant, machinery, vehicles, and equipment, as well as installations and physical infrastructures, land improvements, and buildings, are all included. Hence, this option is incorrect.

Option C) Working Capital: Working capital refers to the raw materials and cash on hand that are used in the manufacturing of goods. The current capital is another name for it. Hence, this option is correct.

Option D) None of them: We already know that Option C. is the correct answer. Hence, this option is incorrect.

Therefore, Option ‘C’ i.e, Working Capital is the correct answer because Working capital is defined as raw materials and cash on hand.

Note: Working capitals include cash, inventories, accounts receivable, and cash equivalents, to name a few. Working capital is the wealth accessible to finance a corporation's day-to-day transactions because capital is a synonym for money.