payback period

The payback period is the amount of time it takes for an investment to generate enough cash flow or savings to recover the initial cost. Essentially, it shows how quickly you can expect to recoup your investment before starting to see profit. It’s a useful metric for evaluating the risk and liquidity of a project or investment, helping you determine how long your money will be tied up before breaking even. Shorter payback periods are generally more attractive, indicating quicker recovery of your initial outlay.