Which of the Following Best Describes the Profitability Index

question 133

Multiple Choice

Which of the following best describes the profitability index?

• A) an index of projects based on their net income
• B) the ratio of present value of net cash inflows to initial investment
• C) the ratio of total cash inflows to initial investment
• D) an array of possible investment outcomes at different discount rates

---

Definitions:

Preferred Stockholders

Investors who own shares that give them priority for dividend payments and assets in the event of a company's liquidation.

Current-Year Dividends

Dividends that are declared and paid to shareholders from the profits made by the company within the current fiscal year.

Common Stockholders

Common stockholders are individuals or entities that own shares of common stock in a company, granting them rights to vote on corporate matters and receive dividends.

Authorized Shares

The maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation.