Factors affecting Fixed Capital
(1) Nature of Business :
A trading concern needs lower investment in fixed assets compared with a manufacturing organization.
(2) Scale of Operations:
An organisation operating on large scale require more fixed capital as compared to an organisation operating on small scale.
(3) Choice of Technique :
A capital-intensive organisation requires more amount of fixed capital than labour intensive organisations.
(4) Technology Upgradation :
Organisations using assets which become obsolete faster require more fixed capital as compared to other organisations.
(5) Growth Prospects :
Higher growth of an organisation generally requires higher investment in fixed assets.
(6) Diversification :
The firms dealing in number of products (Diversification) requires more investment in fixed capital.
(7) Use of Fixed Assets:
Companies acquiring fixed assets on hire purchase or lease system require lesser amount as against cash purchases.