Fixed capital investments have to do with resources that are needed to establish and operate a business, and are considered to be long-term assets, rather than assets which are consumed in a short period of time. There are several different types of investments of this type, with some having to do with business facilities, while others relate to some sort of ongoing support of the business effort. Some examples of these types of expenses include buildings, equipment, and insurance.
One of the more common examples of fixed capital investments are the buildings owned by a business. This can include office buildings, manufacturing plants, laboratories, or any other structure owned and used by the company as part of the business operation. Investments of this type are considered fixed since the building itself is not consumed in the production of goods and services, and will support the business effort for many years before there is any need to improve or replace the asset, such as during a facility expansion or possible sale of the property in order to relocate the business to another site.
Along with buildings, different types of equipment used in the business operation will be classed as fixed capital investments. Computer equipment including desktop systems for the use of employees, laptops and other portable devices utilized during travel, and even the network server and telephone communications equipment are all part of this group, providing service to the business for a number of years until replacement is necessary. For a plant facility, all the machinery used in the production process is also included in this category, making it possible to continually produce goods for an extended period of time before any piece of equipment must be replaced.
Some forms of fixed capital investments include legal documents that help to support the overall financial stability of the company. Contracts that are in place with customers for periods of more than a year are normally considered to be part of this type of fixed investment. In like manner, insurance policies that are in place to protect various aspects of the company operation also fit in to this category, providing a safety net that can be called upon when and as any covered event should take place.
With any type of fixed capital investments, the goal is to acquire assets that will provide ongoing support to the business, even as other types of assets are being continually consumed in the actual production of different goods and services. The assets are considered fixed in that they remain in place and are usable over the long term. Investments of this type, such as equipment, are subject to depreciation over the life of that usage, although some assets such as land and buildings can actually appreciate over the years. The changes in the value of those assets are tracked in the accounting records of the company, making it possible to determine when certain of these investments may be due for replacement as part of an upgrade or to take advantage of some sort of tax break.
