The CFO of Edward's Food Distributors is continually receiving capital funding requests from its division managers. These requests are seeking funding for positive net present value projects. The CFO continues to deny all funding requests due to the financial situation of the company. Apparently, the company is:
A) operating at the accounting break-even point.
B) operating at the financial break-even point.
C) facing hard rationing.
D) operating with zero leverage.
E) operating at maximum capacity.

Question

Quizplus · Accepted Answer

Hard rationing occurs when a company is unable to fund all positive net present value projects due to external financial constraints, which seems to be the case for Edward's Food Distributors as described.

The CFO of Edward's Food Distributors Is Continually Receiving Capital