![]() ![]() Automate Your Expenses with Accounting SoftwareĪ payback period refers to the time it takes to earn back the cost of an investment.Advantages and Disadvantages of the Payback Period.In this guide, we’ll be covering what the payback period is, what are the pros and cons of the method, and how you can calculate it, with concrete business examples. One of the most important capital budgeting techniques businesses can practice is known as the payback period method or payback analysis. That’s why business owners and managers need to use capital budgeting techniques to determine which projects will deliver the best returns, and yield the most profitable outcome. However, there’s a limit to the amount of capital and money available for companies to invest in new projects. Ideally, businesses would pursue all projects and opportunities that hold potential profit and enhance their shareholder’s value.
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