Explain Role or Importance of Fixed Capital
Following diagram briefly explicate the master copy role or importance of blogspot.com//search?q=what-is-fixed-capital-definition">fixed capital.
blogspot.com//search?q=what-is-fixed-capital-definition">assets for the company.
Now let's hash out inwards a higher house points highlighting role or importance of fixed capital.
1. Establishment of company
Every companionship needs fixed upper-case missive of the alphabet to initiate its blogspot.com//search?q=what-is-fixed-capital-definition">business activities. No companionship either big or modest tin endure established without making blogspot.com//search?q=what-is-fixed-capital-definition">investments inwards shape of a fixed capital.
Maximum total of fixed upper-case missive of the alphabet is required during the foundation phase of a company. At this inception level, fixed upper-case missive of the alphabet is mainly used to run across the preliminary expenses of a company.
Fixed Capital is needed to purchase fixed assets required for the polish performance of the companionship inwards a long run.
The companionship needs fixed upper-case missive of the alphabet to brand a purchase of diverse fixed-assets similar province as well as building, works life as well as machinery, slice of furniture as well as fixtures, etc.
2. Promotion of company
Once a companionship is established, its advertisement takes place. The promoters of a companionship execute the promotional activities.
The promoters ask fixed upper-case missive of the alphabet to pay their advertisement expenses.
Generally, the promotional expenses comprehend toll incurred on the:
- Preparation of projection reports,
- Payment of preliminary (establishment) expenses,
- Legal as well as other professional person fees,
- Issuance of a company's prospectus to the investors.
3. Modernisation of company
Modernisation is an innovative approach used to heighten the traditional (existing) performance of whatsoever organization or process.
Modernisation is necessary to heighten efficiency as well as increment productivity of business. It shall endure implemented equally as well as when novel query as well as evolution takes place.
To innovate modernisation, the companionship has to commence novel machineries as well as technologies. It needs fixed upper-case missive of the alphabet to purchase modern machines as well as implement latest technologies.
4. Replacement of obsolete assets
In a course of study of time, companionship has to supersede onetime as well as outdated assets such equally works life as well as machinery, slice of furniture as well as fixtures, etc.
Such replacement of fixed assets is necessary to increment the efficiency as well as productivity of the company.
The companionship needs sufficient fixed upper-case missive of the alphabet to supersede the old, outdated or obsolete assets.
5. Expansion as well as diversification
The important of expansion as well as diversification of a company:
- Expansion agency growth of trouble organization activities inwards the same sector of an economy.
- Diversification implies growth of trouble organization activities inwards to a greater extent than than ane sector of economy.
Generally, nigh companies undergo expansion as well as diversification.
To expand as well as diversify its trouble organization activities, a companionship needs finance inwards the shape of fixed capital.
6. Automation of company
Automation is a procedure of reducing dependency on manual labour and/or minimizing regular human interventions past times installing self-operating (programmed or automatic) machines.
If a labour-intensive companionship decides to automate its routine production activities, thence it must starting fourth dimension procure self-operating machines. Company needs a lot of fixed upper-case missive of the alphabet to brand a purchase as well as install automatic-machines.
7. Widen the orbit of activities
Generally, the master copy focus of nigh companies is on their manufacturing as well as blogspot.com//search?q=what-is-fixed-capital-definition">trading activities. Companies likewise ask to pay proper attending on their distribution network to increment the sale of their goods as well as services.
So, if whatsoever such companionship widens its orbit of activities, thence it volition ask to a greater extent than fixed capital.
8. To increment upper-case missive of the alphabet requirements
Company requires fixed upper-case missive of the alphabet to increment its upper-case missive of the alphabet requirements to sustain as well as appear upward regular contest inwards a long run.
The primary as well as major blogspot.com//search?q=what-is-fixed-capital-definition">sources of fixed capital requirements of a companionship tin endure satisfied from:
- Public – past times issuing shares, and
- blogspot.com//search?q=what-is-fixed-capital-definition">Banks – past times applying for the loans.
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