Which of the following statements is false?
A) The profitability index measures the value created in terms of NPV per unit of resource consumed.
B) The profitability index is the ratio of value created to resources consumed.
C) The profitability index can can be easily adapted for determining the correct investment decisions when multiple resource constraints exist.
D) The profitability index measures the "bang for your buck."

Question

Quizplus · Accepted Answer

The statement that the profitability index can be easily adapted for determining the correct investment decisions when multiple resource constraints exist is false. The profitability index is a simple measure that only takes into account the value created in relation to the resources consumed. It does not consider the complexities that arise when there are multiple resource constraints that need to be taken into account as part of an investment decision. In this case, more advanced analytical tools would be required to properly evaluate the investment options available.

Which of the Following Statements Is False