Question

'Kanand Ltd.' is an automobile manufacturing company started in 2014 under Make in India' initiative of the Government of India. Expecting higher growth in future, it developed higher capacity in the current year taking advantage of the subsidies provided by the government. This would enable 'Kanand Ltd.' to meet anticipated higher demand quickly, For this, 'Kanand Ltd.' invested large amounts in fixed assets leading to higher requirements of fixed capital. Identify the factor affecting fixed capital requirements which 'Kanand Ltd.' kept in mind to meet higher anticipated demand quicker. 

(A) Scale of operations

(B) Nature of business

(C) Diversification

(D) Growth prospects

Answer 1

(D) Growth prospects

By investing in higher capacity and fixed assets, 'Kanand Ltd.' is aligning with its growth prospects, anticipating higher demand in the future. This strategic decision is based on the expectation of increased market demand and expansion opportunities, which would require higher fixed capital investment to scale up operations and meet the anticipated growth effectively and efficiently.