Computers become obsolete fast and are replaced much sooner than furniture. The requirement of fixed capital, hence, is more for the firms dealing in computers.
Identify the factor affecting fixed capital from the above para.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Technology upgradation
Option (1) Choice of technique — Incorrect. This is about using capital intensive or labour intensive methods. It is not about assets becoming out of date.
Option (2) Growth prospects — Incorrect. This is about the firm planning to expand in future. The passage talks about assets becoming obsolete.
Option (3) Technology upgradation — Correct. In some industries assets become obsolete sooner and their replacements become due faster. Computers become obsolete faster than furniture, so these firms require higher fixed capital.
Option (4) Scale of operation — Incorrect. This is about the size of the business. The passage is about assets getting out of date, not size.
NCERT (2026-27 Edition): “4. Technology Upgradation: In certain industries, assets become obsolete sooner. Consequently, their replacements become due faster. Higher investment in fixed assets may, therefore, be required in such cases. For example, computers become obsolete faster and are replaced much sooner than say, furniture. Thus, such organisations which use assets which are prone to obsolescence require higher fixed capital to purchase such assets.” |