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I have been asked this question but I did not know what to write
“Two reasons as subject to hard capital rationing”
I know that hard capital rationing is when a company has limited funds available because the bank will only lend us limited funds. I wrote that funds have been limited by the external institutions because of the riskiness of the project.
I have already seen your lecture on this but still, I couldn’t give two reasons please tell me any two good reasons. Please help me!
Sorry to intervene but these may be plausible reasons.
1) Adverse economic conditions
2) No more non-current assets for security
3)High Operating gearing
4)High financial gearing
5)Low interest covering.
6) Government policy to reduce money supply in economy
7) Monetary policy of increasing interest rates.Soft Capital Rationing:
1) Pursuit of organic growth
2)Reluctance to dissolve ownership
3) Creation of robust internal market so that only best investments would be made
4) Reducing gearing & increasing Interest cover
5) Maintenance of EPS thus no share issues.
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