- November 4, 2021 at 4:35 pm #639924johnbrianeMember
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Hard capital rationing
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.
Sir this is what I understand as per
Soft rationing and hard rationing
Is it correct sir
Thank you in advance
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.
Am I correct ?November 5, 2021 at 9:06 am #639970John MoffatKeymaster
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Hard capital rationing is when they are not able to borrow more. This could be a result of the things you have listed but would not have to be.
Soft capital rationing is when they can borrow more but they choose not to, which again could be due to the things you have listed but do not have to be.
I give examples of both hard and soft rationing in my lectures.
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