capital rationing


Limiting a company's new investments, either by setting a cap on parts of the capital budget or by using a higher cost of capital when weighing the merits of potential investments. This might happen when a company has not enjoyed good returns from investments in the recent past. Capital rationing also could take place if a company has excess production capacity on hand.

Use capital rationing in a sentence

You need to make sure that you are following the capital rationing and can adapt to it as it goes.

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The development team wanted to pursue aggressively pursue this new opportunity, but the board's recent capital rationing decision made it a non-starter.

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Due to insufficient returns on investments of the previous six months, the company has decided to enforce capital rationing on future investments until further notice, and the cap determined, plus the parts of the budget affected, will be announced at next week's meeting.

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Capital Purchase Program (CPP) capital requirement