Capital rationing implies that
A) a firm has constraints to fund all of the available projects.
B) funding needs are equal to funding resources.
C) the available capital will be allocated equally to all available projects.
D) None of the above

Question

Quizplus · Accepted Answer

Capital rationing refers to a situation where a company has limited funds to invest in available projects. Thus, the company cannot fund all the projects, and it needs to prioritize and invest in the most profitable projects. Option A correctly reflects the meaning of capital rationing. On the other hand, options B and C are incorrect as they assume that the funding needs and resources are equal, which is not always the case in capital rationing. Option D is a general statement and does not answer the question.

Capital Rationing Implies That