See: Profitability Index.
We'll get to the actual rule in a second. But be warned: it's a rule of thumb that will seem pretty obvious. Like, in the same category as "don’t stick needles in your eye" or "don’t take a nap on a busy highway."
The profitability index rule states that you shouldn't put money into a project with a profitability index figure of less than 1.0. The rule works because a reading of less than 1.0 on the profitability index means a project isn't profitable.
To put it another way, if you get a reading below 1.0 on the profitability index, it means that, according to all your current information, investing in that venture will lose money. So, uh...don't put your money there. Find something else...something with a profitability index reading of more than 1.0. In other words, invest your cash in something that will make money. Ever see David Letterman's Stupid Pet Tricks segments? Well, this is that...for accountants and investors.
And, oh yeah, don't nap on a busy highway or stick a needle in your eye. Sheesh, do we have to tell you everything?
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Finance: What is a profit center?2 Views
Finance a la shmoop what is a profit center? well here's a profit center and
here's a profit center yeah Google search is where Google makes like a [Google search of profits appear]
hundred forty-two percent of its profits so search for Google is its profit
center in fact if it weren't for its search engine well Google would actually
be losing money YouTube loses a billion dollars a year
depending on how you do the math Google Maps loses 100 million or so everything
else loses a few billion a year and search makes thirty billion dollars a
year annually yeah per year that's what it means
so more than makes up for everything else that's its profit Center and
without that profit center generating profits or cash to fund all these other [Man playing guitar with VR]
wacky ideas the driverless cars our favorite while Google would just be
searching for a way to make money but it doesn't it found it it's called search...
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