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American Bankers Association CTFA Exam - Topic 3 Question 99 Discussion

A project's profitability index is equal to the ratio of the of a project's future cash flows to the project's .
A) Present value; initial cash outlay
C) Present value; depreciable basis
D) Net present value; depreciable basis
B) Net present value; initial cash outlay

American Bankers Association CTFA Exam - Topic 3 Question 99 Discussion

Actual exam question for American Bankers Association's CTFA exam
Question #: 99
Topic #: 3
[All CTFA Questions]

A project's profitability index is equal to the ratio of the of a project's future cash flows to the project's .

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Suggested Answer: A

by Annelle at Jan 23, 2026, 08:32 PM

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Georgeanna
5 days ago
I feel confident about this question!
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Patrick
10 days ago
Makes sense. Profitability index shows efficiency.
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Rodney
16 days ago
Yes, definitely! Future cash flows over the initial cost.
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Monroe
2 months ago
I think it's about the initial investment.
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German
2 months ago
I thought it was more complicated than just that!
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Vanda
2 months ago
Yup, profitability index helps prioritize projects!
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Angella
3 months ago
Wait, are we sure that's the only factor to consider?
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Colby
3 months ago
Totally agree, that's a key metric for evaluating projects!
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Shay
3 months ago
It's the ratio of future cash flows to the initial investment.
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Kirby
3 months ago
The profitability index is the ratio of the project's future cash inflows to its initial cash outflows. Gotta love those finance formulas!
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Broderick
3 months ago
Isn't the profitability index just the ratio of the project's benefits to its costs? I'm pretty sure that's what they taught us in class.
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Margot
3 months ago
The profitability index is the ratio of the project's future cash flows to its initial cost. Simple as that!
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Aliza
4 months ago
The project's profitability index is the ratio of the present value of its future cash flows to its initial investment.
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James
4 months ago
I think it’s the initial investment too, but I remember there were some nuances in different scenarios we went over in class.
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Ceola
4 months ago
I feel like the answer might be the initial investment, but I can't recall if there are any exceptions or specific cases we discussed.
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Mitsue
5 months ago
I remember practicing a similar question where we had to find the profitability index, and it was definitely about cash flows over costs.
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Ayesha
5 months ago
I think the profitability index is calculated using future cash flows divided by the initial investment, but I'm not completely sure.
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Carylon
5 months ago
Alright, I've got this. Profitability index is a useful metric for evaluating project viability. I'll focus on identifying the cash flows and initial investment, then do the ratio calculation. Should be straightforward if I remember the formula.
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Amber
5 months ago
Wait, what's the difference between profitability index and net present value again? I'm getting a bit mixed up on these capital budgeting concepts. Gotta make sure I have them straight.
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Pamella
5 months ago
Profitability index is the ratio of the present value of a project's future cash flows to the project's initial investment, right? I think I can work through this, just need to make sure I set up the calculation correctly.
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Lasandra
6 months ago
Hmm, profitability index... I remember learning about that in my finance class, but I'm a little fuzzy on the details. I'll need to review my notes to refresh my memory.
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Serina
6 months ago
Okay, this looks like a question on capital budgeting. I'll need to think through the definition of profitability index and make sure I understand the components.
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Kaitlyn
2 hours ago
I think it’s about the initial investment.
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