One of the draw backs of the profitablity index as a criteria for judging whether to accept a capital investment project is that:_______

Answers

Answer 1

Answer:

It might lead to over-optimistic projections

Explanation:

In simple words, the problem with using profitability index as the index criteria lies with the procedure of estimating it. In order to consider the business situation, the organisational finance group requires to settle with the corporation supervisors.

Leadership may be too enthusiastic about their assignment, so forecasts for cash flow may be too substantial. Consequently, in predicting the profitability index, there may be an uptrend prejudice.


Related Questions

Irfan runs a small business. His business’s total liabilities amount to $200,000. His net profit for the latest accounting period is $50,000. The total value of all the business assets comes to $600,000. What is the debt to asset ratio in the case of Irfan’s business? The debt to assets ratio of Irfan’s business, to two decimal places, is percent.

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Small businesses are either services or retail operations like grocery stores, medical stores, tradespeople, bakeries, and small manufacturing units.

What is the meaning of Small businesses?

Small companies typically offer services or are retail establishments like grocery stores, pharmacies, tradesmen, bakeries, and micro-manufacturing facilities. Small businesses are privately held companies that need less equipment, labor, and cash than larger companies.

The most straightforward type of business is a sole proprietorship. Small businesses are distinct legal entities such as corporations, partnerships, and sole proprietorships that have fewer employees and/or lower yearly income than a regular-sized company. Businesses are considered "small" if they are eligible for government assistance and favorable tax treatment.

Learn more about the Small Business here:

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