CBSE 2025, BS Set 1

Question

After completing his civil engineering degree, Sankalp decided to start his own business. He started a construction company 'Sankalp Builders'. He entered into an agreement for construction of residential flats on a land of 30 acres. Building of the flats on such a large scale required expensive machinery like bulldozers, excavators, etc. He had the option to buy the machinery or take it on lease. Though Sankalp was in favour of buying, his father advised him to take the decision with caution as construction machinery becomes outdated very fast and needs to be replaced. He also told Sankalp that in future he may think of diversifying his operations and would need funds for that too.

Identify and state any **four factors** discussed above affecting the fixed capital requirements of 'Sankalp Builders'.

Edvaya · Accepted Answer

The correct answer is Subjective. The four factors affecting the fixed capital requirements of 'Sankalp Builders' discussed in the case are: **1. Scale of Operations:** Organisations operating on a larger scale require more fixed capital as they need a bigger plant, more machinery, and larger space. *From the case:* "Building of the flats on such a large scale required expensive machinery like bulldozers, excavators, etc." **2. Financing Alternatives (Leasing):** When leasing alternatives are available, a firm can avoid large upfront expenditure to purchase assets outright, thereby reducing its fixed capital requirement. *From the case:* "He had the option to buy the machinery or take it on lease." **3. Technology Upgradation:** In industries where technology and machinery become obsolete quickly, firms must regularly invest in replacing and upgrading their equipment, increasing fixed capital needs. *From the case:* "...his father advised him to take the decision with caution as construction machinery becomes outdated very fast and needs to be replaced." **4. Growth Prospects / Diversification:** Companies planning to expand into new businesses or diversify operations need higher fixed capital to establish new facilities, buy new equipment, and set up new infrastructure. *From the case:* "He also told Sankalp that in future he may think of diversifying his operations and would need funds for that too."

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