How do ‘Choice of Technique’ and ‘Nature of Business’ affect t

1.	How do ‘Choice of Technique’ and ‘Nature of Business’ affect the ‘Fixed Capital’ requirements of a company? Explain.
Answer» i. Choice of Technique: Those manufacturing enterprises which make use of modern and automatic machines, need large amount of fixed capital. On the other hand, those enterprises in which production is carried out mainly through labourer, need for fixed capital is very little. ii. Nature of Business: Need of fixed capital depends upon the nature of business. Usually, nature of business is of two kinds: Manufacturing Business and Trading Business. In case of manufacturing business, large investment is made in land, building, machinery, etc. Thus, there is need for large amount of fixed capital. On the contrary, in case of trading business in which finished goods are bought and sold, less amount of fixed capital is needed.

How do ‘Choice of Technique’ and ‘Nature of Business’ affect the ‘Fixed Capital’ requirements of a company? Explain.

Answer»

i. Choice of Technique: Those manufacturing enterprises which make use of modern and automatic machines, need large amount of fixed capital. On the other hand, those enterprises in which production is carried out mainly through labourer, need for fixed capital is very little.

ii. Nature of Business: Need of fixed capital depends upon the nature of business. Usually, nature of business is of two kinds: Manufacturing Business and Trading Business. In case of manufacturing business, large investment is made in land, building, machinery, etc. Thus, there is need for large amount of fixed capital. On the contrary, in case of trading business in which finished goods are bought and sold, less amount of fixed capital is needed.

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