Page 218 - BA2 Integrated Workbook - Student 2017

Chapter 14

2.3 Advantages and disadvantages of payback

 Simple to understand.  It is not a measure of
absolute profitability.
 It is a simple measure of
risk  Ignores the time value of

money.
 Uses cash flows
 Does not take account of
 Helps avoid liquidity cash flows beyond the
problems. payback period.

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