Which of the following is correct about the level of collaboration among business organisations?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Collaboration is feasible if the scale of operations of each organisation is not sufficient to make full use of a facility.
Option (1) Collaboration is feasible if the scale of operations of each organisation is not sufficient to make full use of a facility. — Correct. Collaboration means that firms share each other’s facilities, such as a bank using another bank’s ATM. It is feasible when each firm’s scale of operations is too small to use the facility fully. Sharing then cuts each firm’s investment in fixed assets.
Option (2) Collaboration reduces the level of investment in working capital for each of the participating organisations. — Incorrect. A shared facility such as an ATM is a fixed asset. So collaboration reduces each firm’s investment in fixed assets. Working capital is the money for current assets like cash and stock, which sharing a facility does not cut.
Option (4) Collaboration is specially suitable in high risk lines of business. — Incorrect. Being specially suitable in high risk lines of business is said of leasing. A firm that leases an asset pays rent to use it, so it avoids the huge sum needed to buy it.
NCERT (2026-27 Edition): “7. Financing Alternatives: A developed financial market may provide leasing facilities as an alternative to outright purchase. When an asset is taken on lease, the firm pays lease rentals and uses it. By doing so, it avoids huge sums required to purchase it. Availability of leasing facilities, thus, may reduce the funds required to be invested in fixed assets, thereby reducing the fixed capital requirements. Such a strategy is specially suitable in high risk lines of business.” “8. Level of Collaboration: At times, certain business organisations share each other’s facilities. For example, a bank may use another’s ATM or some of them may jointly establish a particular facility. This is feasible if the scale of operations of each one of them is not sufficient to make full use of the facility. Such collaboration reduces the level of investment in fixed assets for each one of the participating organisations.” |