{"id":33709,"date":"2024-04-15T09:20:35","date_gmt":"2024-04-15T09:20:35","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=33709"},"modified":"2024-04-15T09:20:35","modified_gmt":"2024-04-15T09:20:35","slug":"in-capital-budgeting-the-term-capital-rationing-implies","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/in-capital-budgeting-the-term-capital-rationing-implies\/","title":{"rendered":"In capital budgeting, the term ‘capital rationing’ implies"},"content":{"rendered":"

[amp_mcq option1=”That no retained earnings are available” option2=”That limited funds are available for investment” option3=”That no external funds can be raised” option4=”That no fresh investment is required in current year” correct=”option2″]<\/p>\n

The correct answer is: B. That limited funds are available for investment.<\/p>\n

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.<\/p>\n

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.<\/p>\n

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.<\/p>\n

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.<\/p>\n","protected":false},"excerpt":{"rendered":"

[amp_mcq option1=”That no retained earnings are available” option2=”That limited funds are available for investment” option3=”That no external funds can be raised” option4=”That no fresh investment is required in current year” correct=”option2″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[700],"tags":[],"class_list":["post-33709","post","type-post","status-publish","format-standard","hentry","category-business-finance","no-featured-image-padding"],"yoast_head":"\nIn capital budgeting, the term 'capital rationing' implies<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/in-capital-budgeting-the-term-capital-rationing-implies\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta 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