The Profitability Index Is the Ratio Of

question 15

Multiple Choice

The profitability index is the ratio of:

• A) average net income to average investment.
• B) internal rate of return to current market interest rate.
• C) net present value of cash flows to internal rate of return.
• D) net present value of cash flows to return on equity.
• E) present value of cash flows to initial investment cost.

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Definitions:

EPS

Earnings Per Share, a measure of a company's profitability that is calculated by dividing its net income by the number of outstanding shares.

Stock Repurchase

The process of a corporation repurchasing its own stocks from the market to potentially boost the value of the remaining stocks.

Excess Cash

Additional cash held by a business that exceeds its operational and investment needs.

Earnings Per Share

A financial metric that measures the total earnings available to shareholders divided by the number of shares outstanding.