Using a profitability index allows management to rank projects of similar risks with different investment amounts.

Question

Quizplus · Accepted Answer

This statement is true. The profitability index (PI) is a financial metric that measures the ratio of the present value of future cash flows to the initial investment. By comparing PI values across different projects, management can determine which project is most profitable per dollar invested, regardless of the project size or risk level.

Using a Profitability Index Allows Management to Rank Projects of Similar