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List the criteria used for the evaluation of profitability.

List the criteria used for the evaluation of profitability.

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Answer #1

Criteria used for the evaluation of profitability are :

1. Payback period: It is concerned with recoupment of the original investment made in project.It lays emphasis on calculating length of time it will take to recover the original investment.

2. Average annual rate of return: It refers to the percentage of annual net income earned on the average funds invested in a project.

3. Net present value: It is calculated by using an appropriate rate of interest which is the capital cost of a firm.

4. Internal rate of return: It refers to the percentage rate of return implicit in the flow of benefits and costs of the projects.

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