Question

Serena the Chief Financial Officer has a decision to make. She has to rank several alternatives for purchasing a new piece of equipment. Her decision is also constrained by the availability of funds. This is an example of product mix decision. Present value analysis Make or buy decision Capital rationing

Answer 1

Answer: Capital rationing

Explanation:

Capital Rationing occurs when a firm has to ration capital because there's no enough fund to invest in all the attractive projects.

Capital rationing is used by companies in order to limit the number of projects which they'll invest in at a time.

Since Serena has to rank several alternatives for purchasing a new piece of equipment based on the fact that there is constraint with regards to the availability of funds, this is capital rationing.