The correct answer is: B. That limited funds are available for investment.
Capital rationing is a situation in which a company has more investment opportunities than it has funds available to invest. This can happen for a number of reasons, such as a lack of cash flow, a high debt load, or a conservative investment policy. When a company is faced with capital rationing, it must decide which projects to invest in and which to forgo. This can be a difficult decision, as it requires the company to balance the potential returns of different projects with the risk of not having enough funds to cover its operating expenses.
Option A is incorrect because retained earnings are one source of funds that a company can use for investment. However, retained earnings are not the only source of funds, and a company may still face capital rationing even if it has positive retained earnings.
Option C is incorrect because a company can raise external funds, such as debt or equity, to finance investment projects. However, raising external funds can be expensive, and a company may choose to forgo investment opportunities rather than take on additional debt or equity.
Option D is incorrect because a company may still need to make fresh investments even if it does not have any new projects in the current year. For example, a company may need to replace old equipment or make repairs to existing facilities.