Resource Mobilization — Entrepreneurship STD 11 Commerce — Question

The capital which is required for meeting the permanent or long term needs of the business is referred as fixed capital. It is that part of the total capital of an enterprise which is invested for the purchase of fixed assets like land and building, plant and machinery etc.
Fixed capital exhibits following characteristics:

• Not easy to withdraw this capital from the business, as it‘s more like a permanent capital.
• Generally procured through long term financial resources.
• Invested in procuring fixed assets.
• Forms the basis for income generation capacity of the enterprise.

The assessment of fixed capital requirement for a business can be made by preparing a list of fixed assets required. At the same time, an entrepreneur should keep in mind the following factors too:

1. Nature of his/ her business: viz. trading, manufacturing, services.
2. Size of the business: small business needs less fixed capital in comparison to large scale enterprises.
3. Technology to be used in production: i.e. whether capital intensive or labour intensive.
4. Range of production: If more diversified products are manufactured, more is fixed capital requirement in comparison to those who deal in single type of product range.
5. Type of product to be manufactured: It may range from being simple (e.g. soap) to a highly complicated machinery, thus demanding more investment in fixed assets.
6. Method of acquisition of fixed assets: The option of buying a fixed asset demands more capital in comparison to acquiring an asset on lease or hire purchase system.