Question

What is fixed capital? State factors affecting requirement of fixed capital in brief.

Answer 1

Fixed capital involves allocation of firm's capital to long termassets or projects. Managing fixed capital is related to investment decision and it is also called Capital Budgeting.

Factors affecting.....

1. Nature of Business

2. Scale of Operation

3. Technique of Production

4. Technology Up-gradation

5. Growth Prospects

6. Diversification

7. Availability of Finance and Leasing Facility

8. Level of Collaboration/Joint Ventures

Answer 2

Explanation:

Factors Affecting Requirement of Fixed Capital: Investment in fixed assets is for longer duration and is called fixed capital. Fixed capital is financed through long term sources of finance such as equity shares, preference shares, debentures, long term loans, etc.