Question
What is : payback (PB) and the accounting rate of return (ARR).
Answers
GPT 3.5
Payback (PB) and the accounting rate of return (ARR) are two financial metrics used to evaluate the profitability of an investment.
Payback (PB) is the period of time it takes for an investment to generate enough cash flow to recover the initial cost of the investment. It is calculated by dividing the initial investment by the annual cash inflows generated by the investment. A shorter payback period is generally preferred, as it indicates a faster return on investment.
The accounting rate of return (ARR) is a measure of the profitability of an investment relative to the amount invested. It is calculated by dividing the average annual accounting profit generated by the investment by the initial investment. A higher ARR indicates a more profitable investment.
Both payback and ARR are important metrics for evaluating the financial feasibility of an investment and can help investors make informed decisions about whether or not to proceed with a particular investment opportunity.
Payback (PB) is the period of time it takes for an investment to generate enough cash flow to recover the initial cost of the investment. It is calculated by dividing the initial investment by the annual cash inflows generated by the investment. A shorter payback period is generally preferred, as it indicates a faster return on investment.
The accounting rate of return (ARR) is a measure of the profitability of an investment relative to the amount invested. It is calculated by dividing the average annual accounting profit generated by the investment by the initial investment. A higher ARR indicates a more profitable investment.
Both payback and ARR are important metrics for evaluating the financial feasibility of an investment and can help investors make informed decisions about whether or not to proceed with a particular investment opportunity.