State any four factors except diversification which affects the fixed capital requirements of a company.

Factors which affect the requirements of fixed capital are:

(i) Nature of business, as a trading concern needs a lower investment in fixed assets as compared to a manufacturing concern since it doesn’t require to purchase the plant and machinery.

(ii) Scale of operations, as a larger organisation operating at a higher scale needs bigger plant and more space and hence higher investment in fixed assets.

(iii) Choice of technique, as a capital intensive organisation requires higher investment in plant and machinery and thus requires higher fixed capital than a labour intensive organisation.

(iv) Technology upgradation, as industries where assets become obsolete sooner requires higher fixed capital to purchase such assets.