Soft capital rationing
Soft capital rationing arises from an internal limit, such as a budget ceiling, management capacity, risk policy or reluctance to issue new equity. The organisation may in principle have access to additional external finance, but chooses or is constrained by its own policy. Understand the reason for the limit and whether it is truly fixed before selecting projects. Under a binding limit, project divisibility and interactions affect the value-maximising plan.
Worked example
A board caps new investment at $2 million because its engineering team cannot manage more concurrent projects. Analysts compare feasible project combinations and explain the effect of the capacity constraint.
Common mistake
Calling rationing soft merely because it is inconvenient, or assuming an internal budget is automatically economically optimal.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Supporting | September 2026–June 2027 |
| ACCA | FM | Direct | September 2026–June 2027 |