Disadvantages of payback period, Finance Basics

Assignment Help:

Disadvantages of Payback Period

1. Does not receive into account time value of money and supposes that a shilling obtained in the 1st year and in the Nth year have the similar value so like to rank them simultaneously to ascertain the PBP that is unrealistic given such a shilling now is valuable rather than a shilling N years from currently.

2. PBP procedure does not measure the profitability of a venture however quite measures the period of time a venture obtains to pay back the cost.  The procedure is outside looking or lender oriented quite than owner oriented.

3. PBP procedure ignores inflows after PBP and like, it does not accommodate the factor of return to an investment.

4. This procedure will not have any type of impact on the company's share prices as profitability that is one of the most significant factors in gauging the company's value of shares is not a function of PBP and like the procedure fall short of meeting the criteria of investment appraisal.


Related Discussions:- Disadvantages of payback period

System intergration, system integration and infrastructure development is t...

system integration and infrastructure development is the

Working Capital, AsStudents will analyze and synthesize the financial repor...

AsStudents will analyze and synthesize the financial reports of an organization of their choice and present their findings in a PowerPoint presentation (with completed Notes sectio

Getting money, how i can get enough money with out doing any works ???????...

how i can get enough money with out doing any works ????????????

Capital structure ratio, Capital Structure Ratio Gearing/Leverage/Capi...

Capital Structure Ratio Gearing/Leverage/Capital Structure Ratio The ratio signifies the extent whether the firm has borrowed fixed charge capital to finance the

What is holding period return, What is Holding Period Return/Return ...

What is Holding Period Return/Return Holding period yield (HPY) measures the total return from an investment during a given time period in which asset is held by the investo

FASB, FASB Assignment

FASB Assignment

Component ratings under the camel rating system, Question: (a) Describe...

Question: (a) Describe the process for assigning composite and component ratings under the CAMEL rating system. (b) The IMF has developed some indicators to identify early

Advantage of bill - source of finance, Advantage of Bill - Source of Financ...

Advantage of Bill - Source of Finance Advantages of necessitating a Bill as a Source of Finance They are a faster means of raising finance whether drawer is credible.

A+/a1, A+/A1 It is one of the top ratings that a ratings agency allots ...

A+/A1 It is one of the top ratings that a ratings agency allots to an issuer or insurer. This rating indicates that the security or carrier has steady financial backing and ple

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd