Question

Identify the factor affecting fixed capital requirements of Fashion-ate Pvt. Ltd.

Radhika and Vani who are young fashion designers left their job with a famous fashion designer chain to set-up a company 'Fashionate Pvt. Ltd.' They decided to run a boutique during the day and coaching classes for entrance examination of National Institute of Fashion Designing in the evening. For the coaching centre they hired the first floor of a nearby building. Their major expense was money spent on photocopying of notes for their students. They thought of buying a photocopier knowing fully that their scale of operations was not sufficient to make full use of the photocopier. In the basement of the building of 'Fashionate Pvt. Ltd.' Praveen and Ramesh were carrying on a printing and stationery business in the name on 'Neo Prints Pvt. Ltd.' Radhika approached Praveen with the proposal to buy a photocopier jointly which could be used by both of them without making separate investment. Praveen agreed to this. Identify the factor affecting fixed capital requirements of 'Fashionate Pvt. Ltd.'

Answer 1

‘Level of collaboration’ is the factor which affects the business decision of ‘Fashionate Pvt. Ltd.’ Such collaboration results in division of fixed capital investment for all the parties involved and hence results in efficient utilisation of resources.