Given below are two statements:
Assertion (A): Organisations which use assets that are prone to obsolescence require a lower amount of fixed capital.
Reason (R): In certain industries, assets become obsolete sooner, so their replacements become due faster.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A) is false but (R) is true.
Assertion (A): Organisations which use assets that are prone to obsolescence require a lower amount of fixed capital. — False. Such assets go out of date quickly and must be replaced sooner. Buying them again and again takes more money, so these organisations need higher fixed capital. Computers, for example, are replaced much sooner than furniture.
Reason (R): In certain industries, assets become obsolete sooner, so their replacements become due faster. — True. This is the factor of technology upgradation. In some industries the technology changes fast, so old assets lose their use early and must be replaced.
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.” |