Capital Rationing

question 93

Multiple Choice

Capital rationing:

• A) is a way of preserving the assets of the firm over the long term.
• B) is a less than optimal way to arrive at capital budgeting decisions.
• C) assures shareholder wealth maximization.
• D) assures maximum potential profitability.

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Definitions:

Ownership Claim

A declaration or assertion of legal rights to possess and use property.

Note Payable

A written promise to pay a specific amount of money, usually with interest, by a certain date.

Money Borrowed

Funds that have been provided by one party to another under the condition that it will be returned, often with interest.

Monetary Unit Assumption

An accounting principle that assumes transactions and events can be expressed in monetary units for recording and reporting.