Question:
State any three factors that determine the requirement of fixed capital of a company.
State any three factors that determine the requirement of fixed capital of a company.
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Fixed Capital = Investment in Non-Current Assets.
Manufacturing $\gt $ Trading.
Large Scale $\gt $ Small Scale.
Manufacturing $\gt $ Trading.
Large Scale $\gt $ Small Scale.
Updated On: Jul 18, 2026
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Solution and Explanation
Concept:
• Fixed capital refers to funds invested in long-term assets like land, buildings, and machinery.
• Unlike working capital, fixed capital is blocked for a long period.
Step 1: Nature of Business
A manufacturing firm requires more fixed capital as it needs to invest heavily in plant and machinery.
In contrast, a trading business requires less fixed capital as it does not need manufacturing infrastructure.
Step 2: Scale of Operations
Large-scale organizations need more fixed capital because they require larger premises and more advanced machinery to produce at high volumes.
A smaller business unit can operate with limited fixed assets.
Step 3: Technology Upgradation
Industries where technology changes rapidly (like electronics) require higher fixed capital to replace obsolete machines frequently.
Firms using standard, long-lasting technology have lower requirements for frequent upgrades.
• Fixed capital refers to funds invested in long-term assets like land, buildings, and machinery.
• Unlike working capital, fixed capital is blocked for a long period.
Step 1: Nature of Business
A manufacturing firm requires more fixed capital as it needs to invest heavily in plant and machinery.
In contrast, a trading business requires less fixed capital as it does not need manufacturing infrastructure.
Step 2: Scale of Operations
Large-scale organizations need more fixed capital because they require larger premises and more advanced machinery to produce at high volumes.
A smaller business unit can operate with limited fixed assets.
Step 3: Technology Upgradation
Industries where technology changes rapidly (like electronics) require higher fixed capital to replace obsolete machines frequently.
Firms using standard, long-lasting technology have lower requirements for frequent upgrades.
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