Examlex

Solved

How Is the Profitability Index Calculated and How Can It

question 24

Essay

How is the profitability index calculated and how can it be used to choose between projects when funds are limited?


Definitions:

Percentage

A mathematical concept that represents a fraction of 100, commonly used to quantify the relative size of one quantity as a fraction of another.

Strict Residual Dividend

A dividend policy under which dividends are paid from the residual or leftover equity only after all project capital needs are met, prioritizing investment over dividends.

Stable Pattern

A stable pattern indicates consistent and predictable behavior or trends over a period of time.

Dividends Over Time

The cumulative dividends paid out by a corporation to its shareholders over a period, reflecting the company's profitability and policy on profit distribution.

Related Questions