In what way does the payback period provide information to help managers?

Question

Quizplus · Accepted Answer

The payback period provides information on how long it will take for a company to recover its initial investment in a project through future cash inflows. This information can help managers in controlling the effect of the investment on performance measures, such as the return on investment (ROI) or the net present value (NPV), and determining whether the investment is a worthwhile use of resources. Therefore, option B, which suggests that the payback period controls the effect of the investment on performance measures, is the best choice. Options A, C, and D do not correctly describe the role of payback period in providing information to managers.

In What Way Does the Payback Period Provide Information to Help