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

Analysis of financial plans, Part 1: Contingency plan Create contingency pl...

Part 1: Contingency plan Create contingency plans for the following scenarios: > One of your highly qualified consultants has given three months notice and is planning to move to a

Financial crisis , a)  Tonddu plc is expected to report record earnings of ...

a)  Tonddu plc is expected to report record earnings of £120m next year.  It has grown rapidly over the last few years, the growth has been achieved by maintaining a high level of

Transfer price, The price charged when one segment of an organization provi...

The price charged when one segment of an organization provides goods or services to another segment of the organization.

Eps, a. Calculate expected earnings per share (EPS) if the firm is perfectl...

a. Calculate expected earnings per share (EPS) if the firm is perfectly hedged. EPS $

How does continuous compounding benefit an investor, How does continuous co...

How does continuous compounding benefit an investor? The effect of enhancing the number of compounding periods per year is to increase the future value of the investment.  The

Valuing mortgage-backed and asset-backed securities, A cash-flow yield is t...

A cash-flow yield is the discount rate that makes the price of a mortgage-backed or asset-backed security equal to the present value of its cash flows. It is built

Analyse the company capital structure, 1. Analyse the company's capital str...

1. Analyse the company's capital structure and critically assess different types of financing options available to the company. Calculate the cost of these different types of finan

Define advantages for a firm to cross list its equity shares, Discuss any a...

Discuss any advantages you can think of for a company to (1) cross-list its equity shares on much more than one national exchange, (2) To source new equity capital fro

Calculate the cost of capital of organization, The following particulars re...

The following particulars relate to ABC Ltd. at the end of 2008: (i)  Rs. 500,000 equity shares of Rs. 10 each. Present dividend per share is Rs. 15; Market price Rs. 100 per sh

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