Explain the following as factors affecting the requirements of fixed capital:
(i) Scale of operations;
(ii) Choice of technique;
(iii) Technology upgradation and
(iv) Financing alternatives.

(i) Scale of Operations: A larger organisation operating at a higher scale needs bigger plant, more space etc. and therefore, requires higher investment in fixed assets when compared with the small organisation.

(ii) Choice of Technique: Some organisations are capital intensive whereas others are labour intensive. A capital-intensive organisation requires higher investment in plant and machinery as it relies less on manual labour. The requirement of fixed capital for such organisations would be higher. Labour intensive organisations, on the other hand require less investment in fixed assets. Hence, their fixed capital requirement is lower.
(iii) Technology Upgradation: In certain industries, assets become obsolete sooner and, their replacements become due faster. Higher investment in fixed assets may, therefore, be required in such cases. Thus, such organisations which use assets which are prone to obsolescence require higher fixed capital to purchase such assets.

(iv) Financing alternatives: A developed financial market may provide leasing facilities as an alternative to outright purchase. When an asset is taken on lease, the firm pays lease rentals and uses it. By doing so, it avoids huge sums required to purchase it. Availability of leasing facilities, thus reduce the fixed capital requirements.