Q.Discuss the various types of financial needs of a business enterprise.

This essay question requires a student to cover both fixed capital and working capital together, as the two broad types of financial needs studied in this AP BIEAP Commerce chapter.

Every business enterprise has financial needs that can be classified into two broad categories: fixed capital needs and working capital needs.

Fixed capital needs relate to a firm's investment in long-term or fixed assets, such as land and buildings, plant and machinery, furniture and vehicles, which are used repeatedly over many years to carry on production or provide services rather than being resold. How much fixed capital a firm requires depends on the nature and scale of the business, the technology and method of production chosen, the firm's expansion plans, and whether assets are bought outright or acquired on lease. Because fixed assets remain in the business for years, fixed capital is normally raised from long-term sources such as owners' funds or long-term loans. …