Projects Should Be Accepted When the Profitability Index Is Less

question 332

True/False

Projects should be accepted when the profitability index is less than 1.

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Definitions:

Operating Cash Flows

The cash generated from the normal operations of a business, including the production and sale of goods or services.

Marketability

The ease with which an asset can be bought or sold in the market without affecting its price.

Operating Cash Flow

The cash generated from a company's normal business operations before financing and investment activities.

Net Capital Spending

The total expenditure on fixed assets less any sales of fixed assets during a given period, often used in assessing a company's investment in physical assets.