Analysis using the profitability index
A)frequently conflicts with the accept and reject decisions generated by the application of the net present value rule.
B)is useful as a decision tool when investment funds are limited.
C)offers no real value when making capital structure decisions.
D)utilizes the same basic variables as those used in the average accounting return.
E)produces results that typically are difficult to comprehend or apply.

Question

Quizplus · Accepted Answer

The profitability index is useful as a decision tool when investment funds are limited, as it helps in comparing different investments and determining their relative value based on their returns per investment dollar. It can help in prioritizing investments and allocating funds efficiently.

Analysis Using the Profitability Index