Amortisationsdauer (EN)

Amortisationsdauer

The amortization period measures the time required to refinance the initial investment through the generated cash flows. It is a simple static method for evaluating investments. Companies prefer shorter amortization periods as they are associated with lower risk.

In Context

• Typically used together with metrics such as net present value or internal rate of return
• Related to: Net present value, Profitability, Liquidity
• Example use case: A company plans to purchase a new machine for 100,000€. The annual cash flows amount to 25,000€. The amortization period is thus 4 years.