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

Hint:

Growth prospect questions emphasize future expectations rather than current operations. Look for words like "anticipated", "expected", or "projected".

Answer 1

The Correct Option is D

The case highlights Growth Prospects as the key factor because:
1. Anticipated Expansion: - "Expecting higher growth in future" - "Meet anticipated higher demand" - Proactive capacity building
2. Strategic Investments: - Subsidy utilization for scaling up - Automobile industry typically requires 5-7 year planning horizon
3. Distinction from Other Options: - Not (A) Scale: Current operations not mentioned as large - Not (B) Nature: Capital-intensive aspect already inherent - Not (C) Diversification: No new product/market mentioned Industry Context: - Auto manufacturers often overbuild capacity anticipating: ✓ Economic cycles ✓ Model launches ✓ Export opportunities
Final Answer: (D) Growth prospects