Capital Rationing Assignment Help

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Finance is not an easy subject. The subject simply does not deal with numbers or rules. It is comprised of various domains and theories. Capital rationing is a significant part of Finance. 24x7assignmenthelp.com proffers the Finance students with Capital rationing assignment help.

Students usually are not familiar with the term. So let 24x7assignmenthelp.com provide you with a brief description.

What does Capital rationing mean?

Capital rationing is an act of modifying the restrictions on the amount of the new investments or projects to be undertaken by a company. This is accomplished by restricting the limits of the budget that can be spent or invested in taking a new project. Also deciding to set a higher cost of the capital can hurdle the considerations to undertake the projects.

There are two types of Capital rationing:

  • Hard: This situation arrives when the company or firm faces certain difficulties while raising funds when needed. Funds can be raised either through equity or debt. Hard capital rationing arises when there is an external need to minimise the spending which can lead to shortage to finance future projects. Students need to understand the situations through the questions, to get the details they should avail capital rationing homework help.
  • Soft: Also known as internal rationing. This rationing is caused due to the internal policies of the company. The restrictions made of this type can be modified later. So, it is named soft capital rationing.

Reasons for hard capital rationing:

As this type of planning is an external form, and the firms are not able to generate external companies, there are reasons that lead to the need for decision making;

  • Start-up Firms.
  • Poor management.
  • Poor track record.
  • Lender’s restrictions.
  • Industry-specific factors.

Reasons for Soft Capital rationing:

The reasons that lead to the need of making the company-led decision are;

  • Promoter’s Decision.
  • Increase in the opportunity cost of capital.
  • Future scenarios.

We explain the need and examples of these decisions when we aid the students with Capital rationing assignment help.

Advantages of capital rationing are:

  • Budget: Helps in introducing a strong sense of strict budgeting.
  • No wastage: Prevents wastage of resources.
  • Few projects: Well management of few projects that are already invested for.
  • High returns: Invest only in the projects that are expected to return high.
  • More stability: with fewer investments in projects helps to endure tough times.

Disadvantages of Capital rationing:

With the Capital rationing homework help from 24x7assignmenthelp.com you can be aware of the cons of these financial decisions;

  • Violation of the theory about efficient capital markets.
  • Accuracy in the calculation of the cost of the capital.
  • Does not allow maximising the maximum value.
  • Selection of small projects.
  • No consideration for intermediate cash flows.

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