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

The situation where all funding requests are denied due to financial constraints is known as hard rationing. This means that the company is unable to fund any of the projects, even those with positive net present value and high rates of return. Accounting break-even and financial break-even refer to specific points in a company's financial performance, while zero leverage and maximum capital intensity do not apply to this situation.

The Management of the Wish We Could Co