Under conditions of limited resources, when a company is comparing several investments with different amounts of initial outlay, the decision should be made on the basis of:

Question

Quizplus · Accepted Answer

The profitability index (PI) is a useful tool for comparing investments with different initial outlays because it measures the relative profitability of an investment by dividing the present value of future cash flows by the initial investment. This allows for a comparison of the efficiency of different investments in generating returns per unit of investment.

Under Conditions of Limited Resources, When a Company Is Comparing