Capital Rationing Definition and Explanation PDF | Download eBooks
Learn Capital Rationing definition in project management with explanation to study “What is Capital Rationing”. Study capital rationing explanation with project management terms to review project management course for online MBA programs.
Capital Rationing Definition:
Capital rationing is the process of selecting the best group of projects such that the highest overall net present value will result without exceeding the total budget available.
Project Management: A Systems Approach to Planning, Scheduling, and Controlling by Harold Kerzner?
Capital Rationing Explanation:
An organization can identify several different opportunities for a new project. The top management of the organization is responsible to see which opportunity could be exploited in favor of the organization. This means that a project must be selected based on a pre-defined selection criteria. Sometimes, a restriction is imposed on the total investment that can be made for a project. This method is called capital rationing. Capital rationing refer to the fact that the total present value of all the made investments must not exceed a specific amount i.e. budget. Two approaches are used in capital rationing. These are internal rate of return and net present value method (better than the two). Capital rationing is usually used when the investments made previously failed.
Keep Learning Project Management Explanations
What is Payback Period?
A project must be selected based on a pre-defined selection criteria. A way of selecting a project is to compare ...
What is Change Request?
During a project, there arise situations when changes in the project are to be made. The changes can be based ...
What is As Late as Possible Schedule?
When a project is planned, divided into the associated activities and tasks and calculating the time duration for each activity, ...
What are Deliverables?
Deliverables are the expectations of the customer from the contractor and its project team. Deliverables are usually tangible items that ...
What is Closing Process Group?
Different project management knowledge areas must be addressed to carry out a successful project. A group of processes used to ...
What is Flow Chart?
It is important to completely understand the process before improving it. For this reason, flow charts are used. Flow charts ...