Profitability Index Template

The ratio between the present value of future cash flows to the initial investment

Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more. Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets.

Profitability Index Template

This Profitability Index (PI) template will help visualize the present value of future cash flows, which will then be used to calculate the PI of the project. The PI measures the ratio between the present value of future cash flows to the initial investment. Other names for profitability ratio are Profit Investment Ratio (PIR) and Value Investment Ratio (VIR).

Here is a snippet of the template:

Profitability Index Template

Download the Project Profitability Template

Download CFI’s Excel template to advance your finance knowledge and perform better financial analysis.

Profitability Index Formula

The formula for the PI is as follows:

PI - Formula 1

or

PI - Formula 2

Therefore:

  • If the PI is greater than 1, the project generates value and the company should proceed with the project.
  • If the PI is less than 1, the project destroys value and the company should not proceed with the project.
  • If the PI is equal to 1, the project breaks even and the company is indifferent between proceeding and not proceeding with the project.

The higher the profitability index, the more attractive the investment.

More Free Templates

For more resources, check out our business templates library to download numerous free Excel modeling, PowerPoint presentations, and Word document templates.

Analyst Certification FMVA® Program

Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.

 

Financial Analyst certification curriculum

 

A well rounded financial analyst possesses all of the above skills!

 

Additional Questions & Answers

CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.

In order to become a great financial analyst, here are some more questions and answers for you to discover:

 

0 search results for ‘