Scale of operations is a factor affecting both fixed capital and work…

The correct answer is Option (2) → Under working capital, organisations operating at a higher scale generally need a high quantum of inventory and creditors.

Option (1) Under fixed capital, a larger organisation operating at a higher scale needs a bigger plant and more space. — True. A bigger organisation works at a higher scale, so it needs a bigger plant and more space. These are fixed assets, so its fixed capital is higher.

Option (2) Under working capital, organisations operating at a higher scale generally need a high quantum of inventory and creditors. — False. At a higher scale, a firm needs more inventory and debtors, which are current assets. Creditors are current liabilities. More credit from suppliers reduces the working capital requirement, so it cannot raise it.

Option (3) Under fixed capital, a small organisation requires lower investment in fixed assets than a larger organisation. — True. A small organisation needs a smaller plant and less space. So it invests less in fixed assets than a larger organisation.

Option (4) Under working capital, organisations operating at a lower scale require a smaller amount of working capital. — True. A firm working at a lower scale keeps less inventory and has fewer debtors. So it needs a smaller amount of working capital.