Certified Management Accountant Practice Exam 2025 - Free CMA Practice Questions and Study Guide

Firms often use net present value per dollar invested as a criterion to rank projects when resources are limited because it provides a clear measure of profitability relative to the amount of capital required. This approach allows companies to prioritize projects that are expected to yield the highest returns for each dollar spent, ensuring more efficient allocation of scarce resources.

By focusing on net present value (NPV), which considers the time value of money and future cash flows, firms can evaluate the potential profitability and assess long-term impacts. The 'per dollar invested' aspect emphasizes the importance of maximizing return on investment, particularly when choices must be made among multiple potential projects.

Utilizing this criterion helps in making informed decisions that support strategic objectives and enhances financial performance, especially in competitive markets where firms often face resource constraints.