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Question
Explain the following as factor affecting the requirements of fixed capital:
Choice of technique
Solution
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 labour-intensive technique will require less fixed assets.
Capital-intensive organisation ⇒ Higher investment in fixed assets
Labour-intensive organisation ⇒ Lower investment in fixed assets
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