Match List-I (factors affecting the requirement of fixed capital) with List-II:
| List-I | List-II |
|---|---|
| (A) Nature of business | (I) Two banks share the use of one ATM. |
| (B) Diversification | (II) A trading concern needs lower investment in fixed assets than a manufacturing concern. |
| (C) Financing alternatives | (III) A textile company starts a cement manufacturing plant. |
| (D) Level of collaboration | (IV) An asset is taken on lease in place of an outright purchase. |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A)-(II), (B)-(III), (C)-(IV), (D)-(I)
| List-I | List-II | Reason |
|---|---|---|
| (A) Nature of business | (II) A trading concern needs lower investment in fixed assets than a manufacturing concern. | The type of business decides how much fixed capital is needed. A trading concern does not buy plant and machinery, so it needs less in fixed assets. |
| (B) Diversification | (III) A textile company starts a cement manufacturing plant. | A firm that starts a new line of business needs new plant and buildings. So diversification raises the fixed capital requirement. |
| (C) Financing alternatives | (IV) An asset is taken on lease in place of an outright purchase. | A developed financial market offers leasing as an alternative to buying. The firm pays lease rentals and avoids the huge sum needed to buy the asset. |
| (D) Level of collaboration | (I) Two banks share the use of one ATM. | Firms sometimes share each other’s facilities. Each of them then needs to invest less in fixed assets. |
NCERT (2026-27 Edition): “1. 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.” “6. Diversification: A firm may choose to diversify its operations for various reasons, With diversification, fixed capital requirements increase e.g., a textile company is diversifying and starting a cement manufacturing plant. Obviously, its investment in fixed capital will increase.” “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.” |