What is internal and external capital rationing?

Internal capital rationing occurs when a company imposes its own limits on capital expenditures due to factors like budget constraints or management decisions, often prioritizing certain projects over others. External capital rationing, on the other hand, arises when a company faces restrictions in accessing external funds, such as loans or equity financing, due to market conditions or investor perceptions. Both types of rationing can impact a firm's investment strategy and growth potential.