Management Accounting Techniques

Thursdays are my killer. I start University at 11am, yeah not too bad, but I then have straight lectures all the way through to 6pm. It's not as bad as it seems. Although today is tougher! not only is my final 3hr lecture also an exam :( but I then don't get to go home. I have to go straight to Nottingham for stake priesthood leadership.

nah I'd be lying if I say I'm bothered. haha. what worries me is Management Accounting Techniques. My Lecturer is currently going over what we did last week. The accounting rate of return. It's thrilling! she is constantly reminding us what "maybe" in the exam. please. Her last exam she set us was almost identical to the mock exam she set. It was no shock then that the majority of people turned out with a 1st. saying that I'm not going to complain. I need as many high marks as I can get.

MY question today is "what is the point of using the payback method?" CIMA define the payback method as "the time it takes the cash inflow from a capital investment project to equal the cash outflow, usually expressed in years." It basically takes the predicted revenue generated by the acquired asset, in reality it doesn't need to be an asset but in this instant I'm saying it is.

Take the predicted revenue increase or expenditure decrease predicted from the asset(if you don't expect these benefits don't spend the money) and then you work out how many years before you have paid off the asset, or how long it takes the asset to pay for itself.

why do I ask what the point is? because this method takes into NO account of any other factors. Its VERY basic. it doesn't account for inflation or depreciation. It doesn't account for the buying power of money. no I think the discounted cash flow method is much more effective. although still with its flaws.

What are your thoughts? any budding CIMA pros out there want to shed some light on a more effective method?