The payback period:
A) indicates how quickly the investment money will be returned in the form of cash inflows or savings.
B) reflects the return a buyer would have earned from a different use of the same investment capital.
C) fails to quantify the personal risk involved in any buying decision made by a purchasing agent.
D) indicates the total value of all future sales with a customer.
E) pertains solely to those investments that pose a small risk to the buyer.

Question

Quizplus · Accepted Answer

The payback period is a measure of financial risk that indicates the length of time that it will take for an investment to generate cash inflows or savings that equal the initial cost of the investment. It is a useful tool for evaluating the financial feasibility of an investment and determining whether or not it is worth pursuing.

The Payback Period