Rizul after leaving his job wanted to start a Private Limited Company with his son. His son was keen that the company should start manufacturing of mobile phones with some unique features. Rizul felt that mobile phones are prone to quick obsolescence and a heavy fixed capital investment would be required regularly in this business. Therefore, he convinced his son to start a furniture business. Identify the factor affecting fixed capital requirements which made Rizul to choose furniture business over mobile phones.
Rizul after leaving his job wanted to start a Private Limited Company with his son. His son was keen that the company should start manufacturing of mobile phones with some unique features. Rizul felt that mobile phones are prone to quick obsolescence and a heavy fixed capital investment would be required regularly in this business. Therefore, he convinced his son to start a furniture business. Identify the factor affecting fixed capital requirements which made Rizul to choose furniture business over mobile phones.
The correct option is B Technology upgradation
Technological Upgradation: Company X being a manufacturing company uses machinery in the production line. As machines become obsolete, they have to be upgraded from time to time. And to ensure that, Company X needs more fixed capital to purchase fixed assets such as machines. So any company which is vulnerable to assets becoming obsolete quickly requires more fixed capital.
Technology upgradation
Technological Upgradation: Company X being a manufacturing company uses machinery in the production line. As machines become obsolete, they have to be upgraded from time to time. And to ensure that, Company X needs more fixed capital to purchase fixed assets such as machines. So any company which is vulnerable to assets becoming obsolete quickly requires more fixed capital.
