What is duration method in SAP IS-B-PA - Profitability Analysis?

SAP Term: duration method

• Component: IS-B-PA

• Component Name: Profitability Analysis

• Description: Procedure for determining the opportunity interest rate as part of loan costing that you can use as an alternative to the net present value procedure. This is widely used in the Anglo-American area.

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• Key Concepts: 
  The duration method in SAP IS-B-PA Profitability Analysis is a way of calculating the profitability of a project or activity over a period of time. It takes into account the costs and revenues associated with the project or activity, as well as the length of time it takes to complete the project or activity. The duration method is used to determine the profitability of a project or activity over a period of time, rather than just at one point in time. 
  
  How to use it: 
  The duration method in SAP IS-B-PA Profitability Analysis is used to calculate the profitability of a project or activity over a period of time. To use this method, you must first enter the costs and revenues associated with the project or activity. Then, you must enter the length of time it takes to complete the project or activity. Finally, you can calculate the profitability of the project or activity by subtracting the costs from the revenues and dividing by the length of time it takes to complete the project or activity. 
  
  Tips & Tricks: 
  When using the duration method in SAP IS-B-PA Profitability Analysis, it is important to remember that this method only takes into account costs and revenues associated with a project or activity over a period of time. It does not take into account any other factors such as inflation, taxes, or other external factors that may affect profitability. Additionally, it is important to remember that this method only calculates profitability at one point in time and does not take into account any changes in costs or revenues over time. 
  
  Related Information: 
  The duration method in SAP IS-B-PA Profitability Analysis is similar to other methods used to calculate profitability such as return on investment (ROI) and net present value (NPV). Additionally, this method can be used in conjunction with other methods such as cost benefit analysis (CBA) and break-even analysis (BEA) to gain a more comprehensive understanding of profitability.