Which of the following is true regarding the profitability index?

Question

Quizplus · Accepted Answer

The profitability index is useful for selecting projects that will result in the most value created per unit of investment. However, attention must be taken to ensure that all of the constrained resource is used in the optimal way. This is because the profitability index is a measure of the net present value received per unit of investment made. Thus, if the constrained resource is not used efficiently, the profitability index may not accurately reflect the true value of the project.

Which of the Following Is True Regarding the Profitability Index