Question

When using capital rationing, unfunded proposals a.may be reconsidered if funds later become available. b.are discarded for purposes of decision making for all future plans. c.are always considered to be unacceptable. d.None of these choices are correct.

Answer 1

Answer:

A) may be reconsidered if funds later become available.

Explanation:

Capital rationing is a strategy used by businesses (firms, companies, organisations, investors etc) in restricting the number of investments or projects that a company can presently undertake. The projects chosen are those that have the greatest potential to bring in the highest marginal profit to the business. In this strategy, companies prioritise and delve into projects that have a high rate of returns on investments much more readily than projects with a lesser rate of return on investment (ROI).

Unfunded proposals refers to projects or propositions that did not make the cut for the capital released or were not considered as 'great profit opportunities' to be invested into at the present time based on the current strategy (capital rationing). Unfunded proposals are good ideas (as no business deliberately wants to make a loss) but they were not considered by the management to be investments to delve into immediately for various reasons (ranging from low ROI to low funds to wrong timing etc.)

Knowing this, we will therefore see that under the right circumstances, unfunded proposals could be picked up again and invested into.

As such, Option A (unfunded proposals may be reconsidered if funds later become available) is the correct answer