Management of fixed capital means:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Allocation of a firm’s capital to different projects with long-term implications
Option (1) Allocation of a firm’s capital to different projects with short-term implications — Incorrect. Fixed capital decisions affect the business for many years, not for a short time. Only one word differs from the book, ‘short-term’ for ‘long-term’, so read every word.
Option (2) Allocation of a firm’s capital to different projects with long-term implications — Correct. Fixed capital is money invested in long-term assets such as land, buildings and machinery. Managing it means deciding which projects or assets the capital goes into. These are capital budgeting decisions. They affect the growth, profits and risk of the business for years, and they are costly to reverse.
Option (3) Management of current assets — Incorrect. Current assets, such as stock and debtors, are managed as part of working capital.
Option (4) Promoting the liquidity — Incorrect. Liquidity is the concern of working capital. Fixed capital locks money up for a long period.
NCERT (2026-27 Edition): “Management of Fixed Capital Fixed capital refers to investment in long-term assets. Management of fixed capital involves allocation of firm’s capital to different projects or assets with long-term implications for the business. These decisions are called investment decisions or capital budgeting decisions and affect the growth, profitability and risk of the business in the long run. …” |