Simple Financial Parameters to Select Projects

Simple Financial Parameters to Select Projects
Get an 80% discount on all our online courses (see links below) with the voucher: DCA4FRIENDS

00:55 – Overview of the Simple Financial Parameters
02:25 – Defining the PBT
05:10 – Disadvantages of the PayBack Time
07:00 – Defining the ROI
08:30 – Disadvantages of the ROI

In this video, I will explain to you the principles of two simple parameters that will help you evaluate projects related to their financial performance.

The first parameter is the Payback Time or PBT:
The payback time is a simple parameter that expresses the time to recuperate the initial investment.

PBT = Initial Investment/cash flows

Although the parameter is very simple to calculate and is used in many occasions, the parameter, also has disadvantages:
– does not count in time value of money
– only considers the cash flows until the initial investment is reached
– no indication of profitability and reinvestment of cash flows

The second parameter is the Return on Investment:
The ROI is a dimensionless parameter where we compare the revenue with the costs of the production. It allows comparing investments with different sizes by eliminating the size.

ROI = Net Profit/Cost of Goods Sold

Using the ROI has some important disadvantages too:
– effect on divisional ROI may lead to decisions not to invest
– using ROI, the preference is rather on older assets than on new ones
– it can lead to inefficient comparisons
– does not take into account the generated profit of the investment

More about our online courses:

Apply our Voucher for 80% discount on public price:
DCA4FRIENDS

Project Management BasicsLearn the basics about projects and project management in this 14.5-hour course and get yourself a head start over your colleagues and peers
https://www.tabletwise.com/class/6506401121697792/project-management-basics

PMP PreparationPrepare for your PMP Certification with this preparation course. You will also get access to our set of exam questions once you subscribe.
https://www.tabletwise.com/class/6009812586332160/pmp-preparation-course

Subscribe to this channel for more Project Management, Financial, and Business content and leave a comment below if you have any questions.

Website:
http://deceusteracademy.com/

Follow me on FB for more Project Management tips and tricks:
https://www.facebook.com/deceusteracademy/

#PMP #ProjectManagement #DeCeusterAcademy #Finance #DiscreteMath