In Capital Rationing, Alternative Proposals That Survive Initial Screening and Further

question 34

Multiple Choice

In capital rationing, alternative proposals that survive initial screening and further analysis using present value methods are normally evaluated in terms of:

• A) net income.
• B) qualitative factors.
• C) maximum cost.
• D) net cash flow.

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Definitions:

Separate Taxable Entity

An entity that is recognized as separate from its owners for tax purposes, such as a corporation, and therefore must file its own tax returns.

Ownership Interest

A portion or share in the ownership of assets, such as real estate or a company, affording the holder certain rights like income or control.

General Partners

Individuals or entities that participate in the management of a partnership and have unlimited personal liability for the debts and obligations of the partnership.

Limited Partners

Individuals in a partnership who have limited liability to the extent of their investment in the company and do not participate in day-to-day management.