15R-81: Profitability Methods

15R-81: Profitability Methods
AACE International, July 16, 2008

Price: $0 (Member) / $50 (Non-Member)

This recommended practice (RP) of AACE International defines specific practices for determining the profitability of investments. The methods offered are general, since not all profitability techniques can or should be included in an RP. In its broadest sense, profitability is a measure of value added. Increased profitability thus reflects greater economic good for society. There is no economic progress without profitability.

This RP is intended to provide broad guidelines, not standards, for profitability methods that most seasoned practitioners in most industries would consider to be reliable and would generally endorse. Profitability methods with less general applicability, e.g., the revenue requirement technique used by electrical utilities or the benefit-cost ratio used in the public sector, are not included in this RP.

Profitability methods are critical tools for assessing asset performance and making effective investment decisions. These processes are central to portfolio and program management in that selecting the right capital or maintenance projects can be as important to enterprise success as effectively executing any particular project.

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