Advertisements
Advertisements
प्रश्न
Answer the following question.
Explain briefly any four factors affecting the fixed capital requirements of an organisation.
Answer the following question.
Explain briefly any four factors that affect the fixed capital requirements of a company.
उत्तर
Factors affecting the fixed capital requirements of an organisation:
- A scale of operations: A company which is operating in a large-scale of operations will require larger fixed assets in the form of plants, land, and building.
Larger organisation ⇒ Higher investment in fixed assets
Small organisation ⇒ Lower investment in fixed assets - Choice of technique: A company may use labour-intensive or capital-intensive techniques. A company using capital-intensive techniques will require larger fixed assets, whereas a company using the labour-intensive technique will require less fixed assets.
Capital-intensive organisation ⇒ Higher investment in fixed assets
Labor-intensive organisation ⇒ Lower investment in fixed assets - Technology up-gradation: Due to changes in technology or it becoming obsolete over time, companies require a large amount of investment in fixed capital. For example, certain machinery becomes obsolete very soon compared to other assets such as furniture. Therefore, a larger fixed capital is required for upgradation.
Faster up-gradation ⇒ Higher investment in fixed assets
Slower up-gradation ⇒ Lower investment in fixed assets - Financing alternatives: If leasing facilities are available without any lengthy procedures in the financial market, then the fixed capital requirements will be less.
Non-availability of financing alternatives⇒ More fixed capital
Availability of financing alternatives ⇒ Less fixed capital - Growth prospects: a Higher growth of an organisation requires a higher investment in fixed assets. When growth is expected, a company usually chooses to create a higher capacity to meet anticipated higher demand. This further requires a larger investment in capital.
- Type of business: The type of business has a direct bearing upon the fixed capital requirements of the firm. A trading concern needs lower investment in fixed assets as compared to a manufacturing business having a large operating cycle.
APPEARS IN
संबंधित प्रश्न
Rizul Bhattacharya after leaving his job wanted to start a Private Limited Company with his son. His son was keen that the company may start manufacturing of Mobile-phones with some unique features. Rizul Bhattacharya felt that the mobile phones are prone to quick obsolescence and a heavy fixed capital investment would be reuired regularly in this business. Therefore he convinced his son to start a furniture business.
Identify the factor affecting fixed capital requirements which made Rizul Bhattacharya to choose furniture business over mobile phones.
Answer the following question:
In the paint industry, various raw materials are mixed in different proportions with petroleum for manufacturing different kinds of paints. One specific raw material is not readily and regularly available to the paint manufacturing companies. Bonler Paints Company is also facing this problem and because of this, there is a time lag between placing the order and the actual receipt of the material. But once it receives the raw materials, it takes less time in converting it into finished goods.
Identify the factor affecting the working capital requirements of this industry.
‘Reliable Transport Services Ltd.’ specialises in transporting fruits and vegetables. It has a good reputation in the market as it delivers the fruits and vegetables at the right time and at the right place.
A state with reason whether the working capital requirements of ‘Reliable Transport Services’ will be high or low.
Explain the following as factor affecting the requirements of fixed capital:
Natural of business
Explain the following as factor affecting the requirements of fixed capital:
Growth prospects
Explain the following as factor affecting the requirements of fixed capital:
Diversification
Explain the following as factor affecting the requirements of fixed capital:
Level of collaboration
Explain the following as factor affecting the requirement of working capital:
Business cycle
Explain the following as factor affecting the requirements of working capital:
Operating efficiency
Explain the following as a factor affecting the requirement of working capital:
Level of competition
What is Working Capital? Factors affecting requirement of Working capital?
Discuss in brief any four factors that affect the working capital requirement of a company.
List any three factors affecting the Working Capital requirement of a company.
Bright Bulbs Pvt. Ltd., is manufacturing good quality LED bulbs and catering to the local market. The current production of the company is 1,000 bulbs a day. Anita, the marketing manager of the company, surveyed the market and decided to supply the bulbs to five-star-hotels also. She anticipated the higher demand in future and decided to buy a sophisticated machine to further improve the quality and quantity of the bulbs produced. Which factor affected the fixed capital requirements of the company?
State any three factors that determine the requirement of fixed capital of a company.
Match the factors affecting fixed capital requirements given in Column - I with their explanations given in Column - II:
| Column - I | Column - II | ||
| (A) | Nature of Business | (i) | A trading organisation needs lower investments in fixed assets as compared to a manufacturing organisation. |
| (B) | Technology upgradation | (iii) | A textile manufacturing company is installing a cement manufacturing plant and thus its investments in fixed assets is increasing. |
| (C) | Diversification | (iii) | A capital-intensive organisation requires higher investments in fixed assets as compared to labour- intensive organisation. |
| (D) | Choice of Technique | (iv) | Mobile phones became obsolete faster and are replaced much sooner than furniture or many other assets. Hence, these type of businesses require more fixed capital. |
The capital structure of XYZ Ltd. is highly geared. Explain any four factors that were considered by its Finance Manager while formulating such a capital structure for the company.
