What is Payback Period?
Payback Period The time required for the cumulative cash inflows from an investment to equal the initial outlay, used as a simple capital budgeting metric.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Payback Period” Used in Practice?
The payback period is commonly used for initial project screening, but does not account for the time value of money or cash flows after recovery.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Payback Period?
The time required for the cumulative cash inflows from an investment to equal the initial outlay, used as a simple capital budgeting metric.
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