Which of the following is TRUE regarding capital rationing decisions for capital assets?

Question

Quizplus · Accepted Answer

Capital rationing decisions consider many factors such as the available budget, risk, cash flows, and project characteristics. Therefore, there is no one "always" correct choice for capital investments. Companies should undertake a thorough analysis of each available investment option and prioritize them based on their financial and non-financial goals. Choosing an investment based solely on payback period or ARR can lead to suboptimal decision-making. Similarly, choosing an investment based solely on NPV could result in overlooking other investments that could lead to long-term benefits or strategic advantages. Therefore, none of the options A, B, or C apply in every situation.

Which of the Following Is TRUE Regarding Capital Rationing Decisions