9. Capital rationing- Causes and consequences A Aa In the absence of capital rationing, a firm will have investment projects that are judged to be acceptable by its project-evaluation criteria. funds available to finance all proposed capital Consider the following two scenarios and their effects on the average business firm. In most circumstances and all other things remaining constant, which of the two situations, or both or neither, is likely to constrain the firm's capital investment spending? Situation 1 Situation 2 The firm's share prices are depressed and many investors are unwilling to invest in the equities markets The firm's financial condition is rated B- by rating agencles O Both Situations 1 and 2 are likely to impose capital rationing on the f O Situation 1 rm O Situation2 Neither Situation 1 nor 2 a#2 likely to impose capital rationing on the firm