Soft rationing is the:
A) Situation that exists when a ﬁrm has no ﬁnancing available to fund any positive net present value projects.
B) Situation faced by a ﬁrm which must decide which one of two mutually exclusive projects it should accept.
C) Situation faced by a ﬁrm which has multiple net present value projects but has a limited supply of capital funding.
D) Situation where a ﬁrm has more available ﬁnancing than that which is needed to fund all positive net present value projects.
E) Process of raising capital to fund projects while complying with pre-existing contractual agreements.

Question

Quizplus · Accepted Answer

Soft rationing occurs when a firm has multiple net present value projects but has a limited supply of capital funding, forcing the firm to prioritize and select only a subset of projects to pursue. This is different from hard rationing, where the firm has no financing available to fund any positive net present value projects. Option A describes hard rationing, option B describes a decision-making scenario but not necessarily rationing, and options D and E describe situations where there is no rationing occurring.

Soft Rationing Is The