profitability index pi it is a ratio of the, Financial Management

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profitability index pi it is a ratio of the

Profitability Index (PI) :

It is a ratio of the present value of the total cash benefits to the present value of the net cash outlay. The higher the PI, the higher the return. Any project with a PI higher than ONE is acceptable since profits exceed outlay. Projects with PI less than ONE are rejected.

Advantages:

It places the present value of every investment project on a relative basis so that projects of dissimilar sizes of capital outlays can be compared.

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Financial Management: profitability index pi it is a ratio of the

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