Capital rationing is a way companies deal with limited money. It's about picking the best projects when you can't fund everything. Kinda tricky, right?

Companies know they can't do it all. So, they choose. They look at what might make the most cash. But it's not just about money. It's also about fitting with the company's big picture.

The goal? Get the most bang for your buck. Put money where it'll work hardest. It's a bit like betting, but with more math.

It seems this approach helps manage risk too. You're not spreading yourself too thin. Smart, huh?

There's a long-term angle here. Companies think about the future. Where do they want to be in five, ten years?

How do they do it? Well, there are a few ways. They might set the bar higher for new projects. Or put a cap on spending. Some use fancy math to compare options.

Sometimes, the market forces their hand. Other times, it's the bosses making the call. It's not entirely clear which is better.

Here's the thing: while it helps use money wisely, you might miss out on good stuff. It's a balancing act.

For money folks in companies, this is big. It affects how a business grows and keeps up with competitors. In the end, it's all about making smart choices with limited cash.