Business Management SL
Business Management SL
6
Chapters
175
Notes
Unit 1 - Introduction To Business Management
Unit 1 - Introduction To Business Management
Unit 2 - Human Resource Management
Unit 2 - Human Resource Management
Unit 3 - Finance & accounts
Unit 3 - Finance & accounts
Unit 4 - Marketing
Unit 4 - Marketing
Unit 5 - Operations management
Unit 5 - Operations management
Unit 6 - Assessment
Unit 6 - Assessment
IB Resources
Unit 3 - Finance & accounts
Business Management SL
Business Management SL

Unit 3 - Finance & accounts

Unlocking Investment Appraisal: Key Methods & Insights

Word Count Emoji
615 words
Reading Time Emoji
4 mins read
Updated at Emoji
Last edited onย 14th Jun 2024

Table of content

Introduction ๐ŸŒŸ

Investment Appraisal: Evaluates if an investment proposal is worth the cash.

  • ๐ŸŽฏ Goal: Determine if a business venture is worth pursuing and will make money.
  • ๐Ÿ” Helps businesses compare different investment opportunities.

Payback period ๐Ÿ“Œ

  • โฒ๏ธ Tells how long it takes for an investment to pay back its starting cost.
  • Formula

 

Payback Period =\(\frac{ Initial\, Investment \,Cost}{Annual \,Cash \,Flow \,from \,Investment}\)

 

๐ŸŒ Real-World Example: ๐ŸŒ

  • Construction Engineer & Cement Mixer
    • Investment = $200,000
    • Annual Cash Flow = $50,000
    • Payback Period = 4 years
    • This means the engineer gets back the money spent on the mixer in 4 years.
  • Timber-Cutting Machine
    • Takes 3 years and 6 months to repay a $300,000 investment.
    • More complex due to varying cash flows each year.
  • ๐Ÿฅ‡ Rule of Thumb: Shorter payback periods are generally better.

Pros of payback period ๐Ÿ”ฅ

  • ๐Ÿš€ Quick & easy calculation.
  • ๐Ÿ–ฅ๏ธ Useful for fast-changing sectors like tech.
  • ๐Ÿ’ฐ Helps businesses with cash flow issues.
  • ๐Ÿ“† Good for short-term projections.
  • ๐Ÿ‘ฉ‍๐Ÿ’ผ Managers love it because it's simple!

Cons of payback period โ„๏ธ

  • ๐Ÿ›‘ Ignores cash earned after the payback period.
  • ๐Ÿ’ต Focuses only on quick returns, not overall profitability.
  • ๐ŸŒช๏ธ External factors can mess up the numbers.

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IB Resources
Unit 3 - Finance & accounts
Business Management SL
Business Management SL

Unit 3 - Finance & accounts

Unlocking Investment Appraisal: Key Methods & Insights

Word Count Emoji
615 words
Reading Time Emoji
4 mins read
Updated at Emoji
Last edited onย 14th Jun 2024

Table of content

Introduction ๐ŸŒŸ

Investment Appraisal: Evaluates if an investment proposal is worth the cash.

  • ๐ŸŽฏ Goal: Determine if a business venture is worth pursuing and will make money.
  • ๐Ÿ” Helps businesses compare different investment opportunities.

Payback period ๐Ÿ“Œ

  • โฒ๏ธ Tells how long it takes for an investment to pay back its starting cost.
  • Formula

 

Payback Period =\(\frac{ Initial\, Investment \,Cost}{Annual \,Cash \,Flow \,from \,Investment}\)

 

๐ŸŒ Real-World Example: ๐ŸŒ

  • Construction Engineer & Cement Mixer
    • Investment = $200,000
    • Annual Cash Flow = $50,000
    • Payback Period = 4 years
    • This means the engineer gets back the money spent on the mixer in 4 years.
  • Timber-Cutting Machine
    • Takes 3 years and 6 months to repay a $300,000 investment.
    • More complex due to varying cash flows each year.
  • ๐Ÿฅ‡ Rule of Thumb: Shorter payback periods are generally better.

Pros of payback period ๐Ÿ”ฅ

  • ๐Ÿš€ Quick & easy calculation.
  • ๐Ÿ–ฅ๏ธ Useful for fast-changing sectors like tech.
  • ๐Ÿ’ฐ Helps businesses with cash flow issues.
  • ๐Ÿ“† Good for short-term projections.
  • ๐Ÿ‘ฉ‍๐Ÿ’ผ Managers love it because it's simple!

Cons of payback period โ„๏ธ

  • ๐Ÿ›‘ Ignores cash earned after the payback period.
  • ๐Ÿ’ต Focuses only on quick returns, not overall profitability.
  • ๐ŸŒช๏ธ External factors can mess up the numbers.

Unlock the Full Content! File Is Locked Emoji

Dive deeper and gain exclusive access to premium files of Business Management SL. Subscribe now and get closer to that 45 ๐ŸŒŸ