How long it takes for the business to get their investement back
Count the investment over the number of years, to work out the extra number of months
= (amount still owing / the inflow from next year) x 12
Advantages:
Indicates the length of time the capital is at risk for
Important if the business has cash flow problems
Disadvantages:
If you want to make direct comparisons similar amount of start up capital must be needed
It ignores the timing of cash flows
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