What is profitability index, Business Economics

Assignment Help:

The problem with the above method crops up when we want to compare two or more dissimilar (different sized) projects. A mega project may yield a very large NPV sum, whereas a mini Project may yield a very small NPV; but that should not mean that a mega project is commercial; y more profitable than a mini project. To facilitate comparison in such cases, it is suggested that in place of deviation (i.e., GPV – I), one should use a ratio (GPV/I) criteria, because ratios facilitate meaningful comparisons, without creating any bias because of factor like size of project, size and spread of return and costs, life of the project etc. Also note that these ratios is named as index, to be exact, profitability index.


Related Discussions:- What is profitability index

Define corporate governance, Corporate governance is best described as   ...

Corporate governance is best described as   A code for organisational direction, administration and control.

How is business cycle essential in downturns and upturns, How is business c...

How is business cycle essential in economic downturns and upturns? The Business Cycle: It is the short-run alternation between economic upturns and downturns. A

What are the restrictions of dependency theory, What are the restrictions o...

What are the restrictions of dependency theory? The restrictions of dependency theory: • Self sufficiency and import-substitution strategy mean the advantages of Internatio

Business cycle, Analyse the effect of contraction phase to the vulnerable s...

Analyse the effect of contraction phase to the vulnerable society

What is function of world trade organisation, What is the function of World...

What is the function of World Trade Organisation in the promotion of development? The World Trade Organization (WTO) is international association dealing along with the global

What is universal banking, It commonly refers to the combination of commerc...

It commonly refers to the combination of commercial banking and investment banking. It is a supermarket for both wholesaler n retailer financial services as it offers a huge range

Analyse the transmission mechanism, Question: (a) State whether the fol...

Question: (a) State whether the following statements are TRUE or FALSE. Justify briefly your answer. (i) Money is the most liquid medium to store value. (ii) An increa

Calculate the market to book ratio, Calculate the market value of your corp...

Calculate the market value of your corporation at the end of the sample period.  Multiply the last price in the sample times the number of shares outstanding at that time.  You can

Procurement and supply., to explain in detail how to get five rights in pro...

to explain in detail how to get five rights in procurement and supply

How external trade promote economic development and growth, How can externa...

How can external trade promote economic development and growth? International trade permits increased specialisation than higher output permits economies of scale. • A big m

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd