The situation in which the firm limits the 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 places a limit on the funds available for capital investment. It requires selecting the most worthwhile projects within that spending limit.
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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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