Capital Rationing

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The capital rationing refers to the situation in which the firm has more acceptable investments requiring a greater amount of finance than is available with the firm .It is concerned with the selection of a group of investment proposals acceptable under the accept-reject decision .Ranking of the investments project is employed in capital rationing .Projects can be ranked on the basis of some pre determined criterion such as the rate of return .The project with the highest return is ranked first and the project with the lowest acceptable return last .The projects are ranked in the descending order of the rate of return .

 

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