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Key Definitions.

The document defines key investment terms including payback period, net cash flow, average rate of return, and average return. The payback period is the time required for an investment to recover its initial costs through profits or savings. Net cash flow refers to money moving in or out of a business over a specific period of time and can be used to evaluate a company's value. Average rate of return is the mathematical average of returns over a period of time, calculated by adding all returns and dividing by the number of periods. Average return is demonstrated through an example of calculating the average annual return over five years for an investment with varying yearly returns.

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97 views5 pages

Key Definitions.

The document defines key investment terms including payback period, net cash flow, average rate of return, and average return. The payback period is the time required for an investment to recover its initial costs through profits or savings. Net cash flow refers to money moving in or out of a business over a specific period of time and can be used to evaluate a company's value. Average rate of return is the mathematical average of returns over a period of time, calculated by adding all returns and dividing by the number of periods. Average return is demonstrated through an example of calculating the average annual return over five years for an investment with varying yearly returns.

Uploaded by

Jach97
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Definitions

By Jose Antonio Carrera

Payback Period
the length of time required for an investment to recover its initial outlay in terms of profits or savings. According to Google.

Net Cash Flow


Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, limited period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company's value and situation. According to Google.

Average Rate of Return


The simple mathematical average of a series of returns generated over a period of time. An average return is calculated the same way a simple average is calculated for any set of numbers; the numbers are added together into a single sum, and then the sum is divided by the count of the numbers in the set. According to Investopedia.

Average Return Explained


For example, suppose an investment had returned the following annual returns over a period of five full years: 10%, 15%, 10%, 0% and 5%. To calculate the average return for the investment over this five-year period, the five annual returns would be added together and then divided by five. This produces an annual average return of 8%. According to Investopedia.

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