Summary
Keywords
Full Transcript
Return On Investment versus the payback method. Why do we need them, and what are the similarities and differences between these methods for investment analysis? Let’s start with the central question that each of the methods tries to answer. For #ROI , that question is: what % annual return do I get on my investment? For the #paybackmethod , the central question is: how many years does it take to recover the initial investment? ⏱️TIMESTAMPS⏱️ 0:00 ROI vs payback method introduction 0:27 ROI calculation vs payback method calculation 1:13 Mathematical link ROI and payback 1:38 Project selection using the payback method 2:32 Payback method limitation 2:59 Project selection using ROI 3:53 Average ROI 4:16 ROI and payback method summary While they are both fairly easy to understand, each has inherent limitations. More sophisticated methods like Net Present Value or Internal Rate of Return may have to be applied to improve the decision making process. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Learn how to do financial analysis. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Continue this lesson in the app
Install CourseHive on Android or iOS to keep learning while you move.
