The process of determining the recovery period for an investment, referred to in Spanish as “como calcular el payback,” involves calculating the time required for an investment to generate enough cash flow to cover its initial cost. For example, if a project requires an initial investment of $10,000 and is expected to generate $2,000 in cash flow each year, the recovery period would be five years.
Understanding the length of time it takes for an investment to recoup its initial outlay offers a simple measure of its risk and liquidity. It provides a basic level of assessment that is easily communicated. This metric, while simple, helps in making initial assessments of viability, particularly when deciding among competing projects.