Read the following passage carefully and answer the given questions.

Arun wants to open a retail mart. He is thinking over the selection of the best financing alternative. He made an estimation that ₹40 lakhs, is an adequate amount of money to start the venture. He is planning to finance the business by investing ₹25 lakhs of his own money and the rest would be financed by debts. He is very careful about the future cash-flow in the business because the cost of raising funds from external sources is significant. He is working out to ensure that enough funds are available at the right time. If adequate funds are not available, the firm will not be able to honour its commitments and carry out its plans. On the other hand, if excess funds are available, it will unnecessarily add to the cost and may encourage wasteful expenditure. Since it will be a trading business, it needs lower investment in fixed assets. Since Arun is planning to initiate the business from a small level, the quantum of inventory and debtors required is generally low.

"Since it will be a trading business, it needs lower investment in fixed assets."

Which factor is highlighted by the aforesaid statement?

Nature of Business

The correct answer is option 2- Nature of Business.

Nature of Business is highlighted in the given statement.

The statement — "Since it will be a trading business, it needs lower investment in fixed assets." — highlights how the type of business activity (in this case, trading) influences the investment decisions. Trading businesses typically buy and sell goods without manufacturing, so they don't need heavy machinery or large production facilities. Therefore, they require lower investment in fixed assets compared to manufacturing businesses. 

Nature of Business: The type of business has a bearing upon the fixed capital requirements. For example, a trading concern needs lower investment in fixed assets compared with a manufacturing organisation; since it does not require to purchase plant and machinery, etc.