The length of time required for an investment to recover its initial cost through generated cash flows.
The Payback Period is a financial metric that indicates the length of time required for a business to recover its initial investment. It represents the time it takes for the cumulative cash inflows generated by a project or investment to equal the initial cash outlay. The Payback Period helps small business owners assess the profitability and risk associated with an investment. By calculating the Payback Period, owners can determine how quickly they can recoup their investment and make informed decisions about resource allocation and financial planning.