'Best Bulbs Pvt. Ltd.' was manufacturing good quality LED bulbs and catering to the local market. The current production of the company is 800 bulbs a day. Sumit, the marketing manager of the company, surveyed the market and decided to supply the bulbs to five-star hotels also. He anticipated the higher demand in the future and decided to buy a sophisticated machine to improve further the quality and quantity of the bulbs produced.

Identify the factors affecting fixed capital requirements of the company.

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Solution

The factor affecting fixed capital requirements of a company is 'Growth Prospects'. Higher growth and expansion of a company is associated with higher production, more sales, more inputs, etc. This requires a higher quantum of machinery. Thus, organisations with high growth prospects require a higher amount of fixed capital and vice versa.

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