What is capital rationing, Financial Management

Assignment Help:

What is capital rationing? Should a firm practice capital rationing? Why?

Capital rationing is the practice of putting dollar limits on what will be invested in new capital budgeting projects.  Private corporations, partnerships and Proprietorships are in a position to do whatever the owners wish.  It can be disputed, but, that for a publicly traded corporation capital rationing may not be steady with maximizing the value of the firm.  This is because various value adding projects may be rejected if they would cause the firm to go beyond its self imposed capital rationing limit. 

 


Related Discussions:- What is capital rationing

Explain the sharpe performance measure, Explain the concept of the Sharpe p...

Explain the concept of the Sharpe performance measure. Answer:  The Sharpe performance measure abbreviated as SHP is a risk-adjusted performance measure. It is denoted as the mea

Find out the current stock price, Great Pumpkin Farms just paid a dividend ...

Great Pumpkin Farms just paid a dividend of $3.50 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely.  Investors require a 16 p

Calculate the return suitable for a share of common stock, Given that risk-...

Given that risk-averse investors demand more return for taking on much more risk while they invest, how much more return is suitable for, say, a share of common stock, than is suit

Issuing procedure - t-bills, Issuing Procedure Treasury bills are sold ...

Issuing Procedure Treasury bills are sold using the auction procedure. The Treasury entertains both competitive and non-competitive tenders for T-Bills. Government securities f

Types of dividend policy, TYPES OF DIVIDEND POLICY 1. Regular dividen...

TYPES OF DIVIDEND POLICY 1. Regular dividend policy: Payment of dividend at standard rate is known as regular dividend policy. 2. Stable dividend policy: Payment of fix

Display the position explicitly, Q. Display the position explicitly Ex...

Q. Display the position explicitly Example: I borrow 7800000 HKD at time t = t 0 at an interest rate r t0 . After one year I pay back 7800000(1 + rt o ). At

Cost of retained earning, Cost of Retained Earning: - It is on occasion arg...

Cost of Retained Earning: - It is on occasion argued that retained earnings carry no cost since a firm isn't required to pay dividend on retained earnings. Nevertheless this isn't

Which type of financing is appropriate to firm, This case provides the oppo...

This case provides the opportunity to match financing alternatives with the needs of different companies. It allows the reader to demonstrate a familiarity with different types of

Seasonal variation in time series analysis, Seasonal Variation Under th...

Seasonal Variation Under this variation, we observe that the variable under consideration shows a similar pattern during certain months of the successive years. An example of s

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd