Capital rationing refers to
A)setting a minimum acceptable rate of return for a capital outlay.
B)selecting among profitable capital outlays when there are constraints on the funds available.
C)determining the maximum price to pay for a capital product.
D)None of the above

Question

Quizplus · Accepted Answer

Capital rationing occurs when a company has constraints on the funds available for capital expenditures and must choose among profitable projects to allocate those funds. It is a way to prioritize and optimize the use of limited resources. Choice A refers to a minimum acceptable rate of return, which may be used in capital budgeting but is not specific to capital rationing. Choice C refers to determining the maximum price to pay for a capital product, which is also not specific to capital rationing. Choice D is incorrect as there is a clear definition and explanation of capital rationing.

Capital Rationing Refers to