Situation in which firm limits expenditures on capital is classified as________?
Correct answer: B. Capital rationing
- A. Optimal rationing
- B. Capital rationing
- C. Marginal rationing
- D. Transaction rationing
Explanation
Capital rationing occurs when a firm imposes a limit on the funds available for capital expenditures, forcing it to choose among competing projects. The other forms of rationing are not the standard term for this investment constraint.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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