Investor Glossary-payback periodInvestor Glossary-payback periodInvestor Glossary-payback periodInvestor Glossary-payback periodInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Payback Period

The HTML to link to this page
 

In corporate finance, the payback period is a simple measure of the time it takes to recover capital spent on an investment. For example, if a $100,000 machine reduces factory production costs by $25,000 a month, the payback period for investing in the machine is four months. As a basic measure of investment attractiveness, the payback period tends to be most compelling when the period is relatively short. A payback rule is a policy to make a capital expenditure only when the payback period is less than or equal to some period, such as one year. In the major corporation, more sophisticated measures are often used in lieu of the payback period. Net present value (NPV) is recognized as a superior financial measure to the payback period analysis because the payback period does not consider the time value of money. Another alternative to the payback period is the internal rate of return, or IRR.



Rate this payback period definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: in escrow, wholly-owned subsidiary, risk management, phantom income, class C shares, deferred tax, minority interest, 1031 exchange, command economy, stock market close, VIX, 144a, average price per share, cancelled check, deferred revenue, 401a, 1035 exchange, EBITDA, required rate of return, debt service coverage, option premium, current ratio, margin rate, open position, limit order, reverse mortgage, FICO score, Zero Cost Collar, covered put, ex-dividend, FTSE, real GDP, liquidity ratio, LIBOR, labor relations, balance sheet, implied volatility, Key Rate Duration, irrevocable trust, diluted share, quality assurance, retained earnings, stock split, inflation, APR, ex-dividend date, dividends payable, annual return, per diem


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use