GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The proposal is accepted if the profitability index is more than
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Zero
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One
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Three
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Five
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Explanation:
Detailed explanation-1: -The rule is that a profitability index or ratio greater than 1 indicates that the project should proceed. A profitability index or ratio below 1 indicates that the project should be abandoned.
Detailed explanation-2: -Generally, the higher the PI the better. A profitability index greater than 1.0 is often considered to be a good investment, as it means that the expected return is higher than the initial investment. When making comparisons, the project with the highest PI may be the best option.
Detailed explanation-3: -PI equal to one means that there are no profits. Thus, profitability index helps investors in making decisions about whether or not to make a particular investment.
There is 1 question to complete.