Analysis Using the Profitability Index

question 26

Multiple Choice

Analysis using the profitability index:

• A) frequently conflicts with the accept and reject decisions generated by the application of the net present value rule.
• B) is useful as a decision tool when investment funds are limited.
• C) cannot be used to aid capital rationing.
• D) utilizes the same basic variables as those used in the average accounting return.
• E) produces results which typically are difficult to comprehend or apply.

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Definitions:

Void Liens

Legal claims or holds on property that are invalid or unenforceable due to defects in the lien's creation or in adherence to statutory requirements.

Exempt Properties

Items or assets that are protected by law from being seized by creditors or during bankruptcy proceedings.

Federal Exemptions

Specific assets or income types that are protected or exempt from seizure under federal law during bankruptcy.

Insolvency

Refers to the financial condition where an entity can not meet its debt obligations as they come due.