Question

Under which of the following circumstances the fixed capital requirement of a business is not likely to be high?

Options

• When the undertaking is manufacturing goods

• Capital intensive techniques of production are used

• The growth prospects of a company a high

• When the financial alternatives are easily available

Answer 1

When the financial alternatives are easily available

Explanation:

• Manufacturing needs machinery, so high fixed capital is required.
• More machines = higher fixed capital.
• High growth = need for more fixed assets, so more fixed capital.
• When financial alternatives (like leasing, borrowing) are available, a business may not need high fixed capital because it can use external sources instead of investing its own funds.