What is a payback period? It helps investors to understand the component which is helping the company to drive profitability. It helps to know if the company is running on debt or more Equity funding or genuine cash flows. How is a payback period calculated? It is calculated by calculating the time period over which the Initial Capital investment is returned by the business and the business by itself starts generating more capital. Thus the time frame between these two is known as the calculation of the payback period.
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