Capital rationing may be imposed because of all of the following except:
A) capital market conditions are poor.
B) management has a fear of debt.
C) stockholder control problems prevent issuance of additional stock.
D) the company's stock price is at an historically high level.

Question

Quizplus · Accepted Answer

Capital rationing is typically imposed when a company has limited resources and must make strategic decisions regarding which projects to pursue. The primary factors that may limit resources include poor capital market conditions (A), a fear of debt (B), or stockholder control problems preventing issuance of additional stock (C). However, a company's stock price being at an historically high level would not typically be a reason to impose capital rationing, as this indicates strength in the company's financial position and may actually make it easier to raise capital. Therefore, option D is the correct answer.

Capital Rationing May Be Imposed Because of All of the Following