What Is The Advantage Of Payback Method?


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Anonymous Profile
Anonymous answered
Calculation of net cash flows more objective
consider the risk factor of the project
it is relatively easy to calculate
short payback periods benefit business liquidity and facilitate faster growth
Anonymous Profile
Anonymous answered
·Uses cash flows rather than accounting profits and hence is more objectively based
·The technique is considered to be simple to operate and easy to understand
·Acts as a yardstick in comparing profitability of projects
·It is to be considered that, the shorter the payback period, the less risky the project
·Shows how soon the cost of purchasing an asset will be recovered
·Useful as a measure of liquidity –more immediate return of cash is preferred.
·Short-term approach reduced the risk of loss through obsolescence

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