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Capital Rationing - Investment Decisions, Business Economics & Finance Video Lecture | Business Economics & Finance - B Com
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FAQs on Capital Rationing - Investment Decisions, Business Economics & Finance Video Lecture - Business Economics & Finance - B Com
| 1. What is capital rationing in investment decisions? |  |
Ans. Capital rationing refers to the situation where a company has limited funds or resources available for investment purposes. It occurs when a company sets a maximum limit on the amount of capital it can allocate to different investment projects.
| 2. Why do companies implement capital rationing? | |
Ans. Companies implement capital rationing for several reasons. It helps in prioritizing investment projects and allocating resources efficiently. By setting a limit on capital expenditure, companies can ensure that they invest in the most profitable and strategic projects while avoiding overinvestment or excessive borrowing.
| 3. How does capital rationing affect investment decisions? | |
Ans. Capital rationing affects investment decisions by forcing companies to select the most optimal projects within the available budget. It requires careful evaluation and comparison of different investment opportunities based on their expected returns, risks, and alignment with the company's objectives. Projects that do not meet the required criteria may be rejected or delayed due to capital constraints.
| 4. What are the implications of capital rationing on business economics? | |
Ans. Capital rationing has significant implications on business economics. It helps in managing financial resources effectively, minimizing the risk of financial distress, and improving overall profitability. By prioritizing investments, companies can focus on projects that generate the highest returns and contribute to long-term growth and sustainability.
| 5. How can companies overcome capital rationing? | |
Ans. Companies can overcome capital rationing by exploring alternative sources of funding such as equity financing, debt financing, or strategic partnerships. They can also consider cost-cutting measures, efficiency improvements, or restructuring existing projects to free up capital for new investments. Additionally, companies can reassess their capital budgeting process and criteria to ensure optimal allocation of resources.
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Dec 23, 2024 Last updated |
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