Introduction to Corporate Finance — Secretarial Practice STD 12 Commerce / Arts — Question
Maharashtra BoardEnglish MediumSTD 12 Commerce / ArtsSecretarial PracticeIntroduction to Corporate Finance4 Marks
Question
There are various factors affecting the requirements of fixed capital.
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Answer
Fixed capital being long-term capital is required for the development and expansion of the company.
The nature and size of a business have a great impact on fixed capital. Manufacturing businesses require huge fixed capital whereas trading organizations like retailers require less fixed capital.
Methods of acquiring assets on rentals or on a lease/installment basis will require less amount of fixed assets.
If fixed assets are available at low prices and concessional rates then it would reduce the need for investment in fixed assets.
International conditions and economic trends like a boom period will require high investment in fixed assets and a recession will lead to less requirement.
Similarly, consumer preferences, competition, and highly demanded goods and services will require a large amount of fixed capital. E.g. Mobile phones. Thus, it is rightly said that there are various factors affecting the requirements of fixed capital.
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