Question

Soft capital rationing occurs when:

a) No profitable projects can be identified.

b) A business cannot raise additional financing.

c) Banks are not willing to make soft loans.

d) Management limits the amount of investable capital.

Answer 1

Soft capital rationing occurs when management limits the amount of investable capital.

Step-by-step explanation:

Soft capital rationing occurs when management limits the amount of investable capital. This means that even if profitable projects exist, the management sets a constraint on the amount of capital that can be invested. Soft capital rationing could be driven by various factors, such as concerns about liquidity, risk management, or financial stability.