Payback Period Flashcards
1
Q
Advantages of payback period (4)
A
- simple to use
- easy to calculate
- effective to use when technology is changing at a fast rate, such as high tech products, in order to cover the cost of investment as quickly as possible
- helps with managing cash flow
2
Q
Disadvantages of cash flow
A
- ignores flows of cash over the lifetime of the product
- ignores total profitability, the focus is just on the speed at which the initial outlay is paid
