The Profitability Index Reflects the Value Created Per Dollar

question 109

Multiple Choice

The profitability index reflects the value created per dollar:

• A)invested.
• B)of sales.
• C)of net income.
• D)of taxable income.
• E)of shareholders' equity.

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Definitions:

Value Added Approach

This is a method for calculating GDP that sums the values added at each stage of production, avoiding the double-counting of intermediate goods.

Calculating GDP

The process of estimating the total monetary value of all finished goods and services produced within a country's borders in a specific time period.

Double Counting

The mistake of counting the same item or transaction more than once when calculating economic indicators, leading to inaccuracies.

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate measure of the economic value of goods and services produced over a specific period.