Which Three of the Following May Be Reasons for Soft

question 28

Multiple Choice

Which three of the following may be reasons for soft capital rationing?

• A) Senior managers are aware that to undertake all positive NPV projects may place a strain on available managerial talent or other resources.
• B) Senior management retains control over divisions by placing limits on the amount any particular division can spend on a set of projects.
• C) Managerial unwillingness to borrow.
• D) Agencies external to the firm will not supply finance for all positive NPV projects.

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Definitions:

Perpetual Inventory System

An inventory accounting system that records purchases and sales of goods instantly through computer systems, providing a continuous record of inventory levels.

Inventory Shrinkage

The loss of products between procurement and sale, often due to theft, damage, or administrative errors, affecting inventory levels.

Sales Discounts

A reduction in the price of goods or services offered to customers, typically as an incentive to encourage prompt payment.

Normal Debit Balance

Refers to the expected balance of an account based on its classification in the accounting system, where assets and expenses typically have a debit balance.