In capital budgeting, what occurs when a company faces capital constraints and must prioritize profitable projects under a fixed budget limit?

Explanation

* Capital Rationing occurs when a firm limits investment expenditure despite having multiple positive NPV projects available.
* Hard Rationing is imposed by external credit markets; Soft Rationing is self-imposed by internal management budgets.
* Profitability Index (PI) is typically used to maximize NPV total value under capital constraints.