Which of the Following Statements Is False

question 77

Multiple Choice

Which of the following statements is false?

• A) If there is a fixed supply of resources available, you should rank projects by the profitability index, selecting the project with the lowest profitability index first and working your way down the list until the resource is consumed.
• B) Practitioners often use the profitability index to identify the optimal combination of projects when there is a fixed supply of resources.
• C) If there is a fixed supply of resources available, so that you cannot undertake all possible opportunities, then simply picking the highest NPV opportunity might not lead to the best decision.
• D) The profitability index is calculated as the NPV divided by the resources consumed by the project.

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Definitions:

Sales

Revenue generated from goods or services transacted by a company.

Product Warranty

A guarantee provided by a seller that a product will meet certain performance and quality standards or will be repaired or replaced within a certain period.

Warranty Repairs

Services provided to repair or replace products that fail to meet certain standards or conditions specified in a warranty agreement.

Adjusting Entry

Journal entries made in accounting at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.