Advantages Of Pay Back Period (PBP)
1. Pay back period is simple and easy to understand and compute.
2. Pay back period is universally used and easy to understand.
3. Pay back period gives more importance on liquidity for making decision about the investment proposals.
4. Pay back period deals with risk. The project with a shortest PBP has less risk than with the project with longest PBP.
5. The short term approach of pay back period is an added advantage of calculation of capital expenditure.
Disadvantages Of Pay Back Period (PBP)
1. In the calculation of pay back period, time value of money is not recognized.
2. Pay back period gives high emphasis on liquidity and ignores profitability.
3. Only cash flow before the pay back period is considered. Cash flow occurred after the PBP is not considered.
1. Pay back period is simple and easy to understand and compute.
2. Pay back period is universally used and easy to understand.
3. Pay back period gives more importance on liquidity for making decision about the investment proposals.
4. Pay back period deals with risk. The project with a shortest PBP has less risk than with the project with longest PBP.
5. The short term approach of pay back period is an added advantage of calculation of capital expenditure.
Disadvantages Of Pay Back Period (PBP)
1. In the calculation of pay back period, time value of money is not recognized.
2. Pay back period gives high emphasis on liquidity and ignores profitability.
3. Only cash flow before the pay back period is considered. Cash flow occurred after the PBP is not considered.
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