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Business Studies · 2025 · 6 marks
CBSE 2025 · Region 6 · Set 1 · Q33
After completing his civil engineering degree, Sankalp decided to start his own business. He started a construction company ‘Sankalp Builders’. He…
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 $\displaystyle 30$ 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becomes outdated very fast and needs to be replaced.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'.
Marking-scheme solution
Factors affecting the fixed capital requirement are-
1. Nature of business:
A trading concern needs a lower investment in fixed assets as
compared to a manufacturing concern since it doesn’t require to
purchase plant and machinery.
1. 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.
2. Technology Upgradation: In industries where assets become
obsolete sooner, higher investment in fixed assets would be
required.
3. Financing Alternatives: Availability of leasing facilities, may
reduce the funds required to be invested in fixed assets,
thereby reducing the fixed capital requirements.
4. Diversification: A firm may choose to diversify its operations
which results in increase in fixed capital requirements.
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CBSE Class 12 Business Studies past-paper question from the 2025 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.