8 Factors Affecting the Requirement of Fixed Capital

Some of the factors affecting the requirement of fixed capital are as follows:

Fixed capital involves allocation of firm’s capital to long term assets or projects. Managing fixed capital is related to investment decision and it is also called Capital Budgeting. The capital budgeting decision affects the growth and profitability of the company.

Business Management

Image Courtesy : images04.olx.com.pk/ui/Jobs.jpg

The long term assets bring benefits over a long period and investment in these assets involves huge amount of funds. The capital budgeting decisions include purchase of land, building, plant and machinery, change of technology, expenditure of advertising campaign, research and development etc.

Factors Affecting Requirement of Fixed Capital:

Investment in fixed assets is for longer duration and is called fixed capital. Fixed capital is financed through long term sources of finance such as equity shares, preference shares, debentures, long term loans, etc.


1. Nature of Business:


2. Scale of Operation:


3. Technique of Production:


4. Technology Up-gradation:


5. Growth Prospects:


6. Diversification:


7. Availability of Finance and Leasing Facility:


8. Level of Collaboration/Joint Ventures:
