A2 - Business - Making investment decisions

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Investment appraisal
The process of analysing the financial merits of a possible future investment.
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Payback
Calculation of how long it will take to recoup the cost of an initial investment.
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Average rate of return (AVR)
Average annual profit expressed as a percentage of initial investment
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Net present value (NPV)
The total net return of an investment stated in today's monetary value
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Discount factor
The rate by which future cash flows are reduced (discounted) to reflect current interest rates.
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Time value of money
Recognition of the fact that £1 in the future due to a fall in its purchasing power.
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Investment criteria
A pre-determined target against which to judge an investment.
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Other cards in this set

Card 2

Front

Calculation of how long it will take to recoup the cost of an initial investment.

Back

Payback

Card 3

Front

Average annual profit expressed as a percentage of initial investment

Back

Preview of the back of card 3

Card 4

Front

The total net return of an investment stated in today's monetary value

Back

Preview of the back of card 4

Card 5

Front

The rate by which future cash flows are reduced (discounted) to reflect current interest rates.

Back

Preview of the back of card 5
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