Asked by Kevin Huynh on Jun 12, 2024
Verified
When firms do not have sufficient available financing to invest in all of the positive net present value projects they have identified, _____ is (are) said to exist.
A) excess financing
B) contingency options
C) strategic options
D) managerial options
E) capital rationing
Capital Rationing
The process of restricting the amount of capital available for investment in new projects by a company due to budget constraints.
- Elucidate the impact of capital rationing on the choice of projects and the concept of soft and hard rationing.
Verified Answer
MP
Manali PatelJun 17, 2024
Final Answer :
E
Explanation :
Capital rationing occurs when a company does not have enough financial resources to support all projects with a positive net present value, leading to the need to prioritize and select among them.
Learning Objectives
- Elucidate the impact of capital rationing on the choice of projects and the concept of soft and hard rationing.