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Unformatted text preview: specific variable o Capital Rationing Capital Rationing occurs when a firm or division has limited resources Soft Rationing o The limited resources are temporary, often self-imposed Hard Rationing o Capital will never be available for this project The profitability index is a useful tool when a manager is faced with soft rationing o Break-Even Analysis Common tool for analyzing the relationship between sales volume and profitability There are three common break-even measures Accounting Break-even o Sales volume at which net income = 0 Cash break-even o Sales volume at which operating cash flow = 0 Financial break-even o Sales volume at which net present value = 0...
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