Payback period is the time in which the initial cash outflow of an investment is expected to be recovered from the cash inflows generated by the investment. It is one of the simplest investment appraisal techniques.
In payback period of investment appraisal method all cash inflows and outflows are analysed and find out that in how many years investment proposal will earn the invested money.
features of a sound appraisal investment technique
The Payback method is one of the investment appraisal methods. Other methods to appraise investments are the Average Rate of Return and the Net Present Value method.
Kenneth McConville has written: 'Appraising an investment appraisal' 'Appraising an economic appraisal'
Modern industries follow traditional techniques of performance appraisal as they are suitable for business management. Traditional techniques are structured in a formal way and rely on continued feedback and coaching.
In any New typical Investment on a business the ideal breakeven will be 2 years. So keeping that in mind one should jump into it. And looking into the performance growth chart of your business it should go on in a gradual inclination and not like a step or volatile undulating chart.
Rob Dixon has written: 'Venture capitalists and investment appraisal'
Chen Choy Loh has written: 'Capital investment appraisal'
If there is no legal requirement for an appraisal, and you are willing to pay the price asked, you can proceed without an appraisal. An appraiser can, however, supply 'another set of eyes' on the investment you are about to make, and that expertise may be worth paying one.
Qualitative investment appraisal involves the assessment of investments based on subjective factors such as quality of management, brand reputation, and market demand. It relies on expert judgment and is less objective. On the other hand, quantitative investment appraisal involves the use of measurable data such as financial ratios, discounted cash flow analysis, and payback period. It provides a numerical result that can be compared across different investment options and is more objective.
J. Bullock has written: 'Capital investment appraisal' 'Comprehensive review for FMGEMS'