JEFMS Journal

ABSTRACT:

The profitability index plays an important role in helping decision-makers, whether they are short-term decisions or long-term decisions, the profitability index is used in various ways to assist short-term decision-makers related to:
- By using scarce economic resources and developing the optimum production plan.
- Determining production lines or products that continue to work and those lines or products that are discontinued based on their profitability.
- Pricing of products.
- Granting incentives to salesmen.

These decisions are part of sustainability activities for any company, Also, the profitability index is used in the comparison between long-term investment projects when the net present value criterion is positive for these projects, meaning that they are economically feasible, and it is necessary to choose some of them without the other.

KEYWORDS:

differential analysis; scarce resources; profitability index; absolute profitability; Relative profitability

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