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Business Studies · 2026 · 6 marks
CBSE 2026 · Region 1 · Set 1 · Q31
‘Koka Manufacturing Ltd.’ is a large scale manufacturer in the electronics industry. In this industry assets are prone to obsolescence and their…
‘Koka Manufacturing Ltd.’ is a large scale manufacturer in the electronics
industry. In this industry assets are prone to obsolescence and their
replacement becomes due faster with change in technology. The company
is constantly under pressure to upgrade its machinery and equipment as
it would help company to stay competitive, improve its product quality
and reduce production costs. So instead of purchasing the machinery,
company decides to lease the required machinery, giving it flexibility to
upgrade equipment at the end of lease term. This helps company to
maintain operational efficiency, technological competitiveness and
financial flexibility.
Identify and explain four factors that would affect the fixed capital
requirements of ‘Koka Manufacturing Ltd.’.
Marking-scheme solution
The four factors affecting fixed capital requirements of Koka
Manufacturing Ltd. are as follows:
(i)
Nature of business
A trading concern needs lower investment in fixed assets
compared with a manufacturing organisation; since it does not
require to purchase plant and machinery, etc.
(ii)
Scale of operation
A larger organisation operating at a higher scale needs a bigger
plant, more space etc. and therefore, requires higher investment in
fixed assets when compared with the small organisation.
(iii)
Technology upgradation
In certain industries, assets become obsolete sooner.
Consequently, their replacement become due faster. Higher
investment in fixed assets may, therefore, be required in such
cases.
(iv)
Financing alternatives
When an asset is taken on lease, the firm pays lease rentals and
uses it. Availability of leasing facilities may reduce the funds
required to be invested in fixed assets, thereby reducing the fixed
capital requirements.
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CBSE Class 12 Business Studies past-paper question from the 2026 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.