Profitability index
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Profitability index is the index that is found by dividing the project's present value of future cash flows by its initial cost. A profitability index greater than 1 is equivalent to a project's having positive net present value.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Profitability index. Found by dividing the project's present value of future cash flows by its initial cost. A profitability index greater than 1 is equivalent to a project's having positive net present value.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
