Explain briefly any four factors that affect the fixed capital requirements of a company.

Factors affecting fixed capital requirements of a company:

(i) Nature of business: A manufacturing concern requires more fixed capital to purchase fixed assets. For example, plant and machinery, etc. as compared to a trading concern.

(ii) Scale of operations: A larger organisation operating at a higher scale needs a bigger plant, more space, etc., and therefore requires more fixed capital as compared to the smaller organisations.

(iii) Choice of technique: The business organisations using capital intensive techniques require more fixed capital whereas companies using labour-intensive techniques require less capital.

(iv) Technology upgradation: Industries in which technology upgradation is fast need more amount of fixed capital as when new technology is invented, old machines become obsolete and they need to buy new plants and machinery whereas companies where technological upgradation is slow they require less fixed capital as they can manage with old machines.

Leave a Comment

Your email address will not be published. Required fields are marked *