单词 | capital rationing |
释义 | capital rationingCapital rationingCapital Rationingcapital rationinga situation where a firm selects an annual capital budget which is less than the amount required to undertake all INVESTMENTS promising a rate of return in excess of the cost of capital. For example, if a firm requires a minimum 20% return on any investment then all of the appropriate investment opportunities available to the firm which promise a return of 20% or more may involve a total expenditure of, say, £10 million. However, if the firm decides that it is willing to spend only £6 million, then it must rank investment opportunities in descending order of rate of return, undertaking those with the highest promised return and rejecting others even though the latter opportunities promise a re- turn greater than the 20% cost of capital. The firm is said to be in a situation of capital rationing because it is investing less than the amount dictated by usual profit maximizing criteria. See CAPITAL BUDGETING, INVESTMENT APPRAISAL. |
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