Question

State any two factors affecting fixed capital requirement.

Hint:

Fixed capital funds long-term assets like land, building, plant and machinery.

Answer 1

Step 1: Factor 1:
Nature of business — a manufacturing firm needs heavy investment in plant and machinery (high fixed capital), while a trading firm needs comparatively little.

Step 2: Factor 2:
Scale of operations — a large-scale organisation requires more fixed assets (buildings, machinery) than a small-scale one.

Final Answer:
Two factors: (1) Nature of business, and (2) Scale of operations.