The management of the Wish We Could Co. has numerous requests on their desks from division managers. These requests are seeking funds for positive net present value projects with projected rates of return ranging from 8 percent to 100 percent. Management determines that they must deny all funding requests due to the financial situation of the company. Management is apparently in a situation referred to as:
A) Accounting break-even.
B) Financial break-even.
C) Hard rationing.
D) Zero leverage.
E) Maximum capital intensity.

Question

Quizplus · Accepted Answer

Hard rationing occurs when a company cannot fund all positive net present value projects due to external financial constraints, not because the projects are unattractive.

The Management of the Wish We Could Co