Page 345 - F2 - MA Integrated Workbook STUDENT 2018-19
P. 345

Capital budgeting




               3.5  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. (can use
                       Uses cash flows rather                      discounted cash flows)
                        than accounting profits
                                                                   Does not take account of
                       Helps avoid liquidity                       cash flows beyond the
                        problems.                                   payback period.





















































                                                                                                      337
   340   341   342   343   344   345   346   347   348   349   350