Motivation theories used to explain turnover intention

Motivation theories used to explain turnover intention This chapter discussed the used of motivation theory to explain the turnover intention or behavior amongst the auditors in Sabah. Besides, turnover intention the dependent variable, job satisfaction and organizational commitment the independent variables are being defined and conceptualized in line with this study. The relevant literature or past research done on this area of study is also being reviewed. Lastly, the findings on the relationships between the variables are being discussed. 2.1 Theory 2.1.1 Theory of Reasoned Action Turnover process models draw heavily from rational decision making models such as Fishbein and Ajzens (1980) theory of reasoned action, which stresses the importance of behavioral intentions in predicting and understanding turnover. However, there is research on the manner on which attitudes and intentions get translated into behavior that can inform turnover theory and research. Examples include research on perceptions of behavior control, behavior consistency, and the role of emotional arousal. For the purpose of this study, Perceived Behavioral Control is usedà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦. 2.1.1.1 Perceived Behavioral Control Many prominent models of the turnover process implicitly or explicitly use elements of Fishbein and Ajzens (1980) Theory of Reasoned Action. This theory and its evolution into the Theory of Planned Behavior (Ajzen, 1991) suggest that intentions to perform a behavior are the more immediate precursors to actual behavior. Intentions are a function of attitudes toward performing the behavior, which are in turn a function of beliefs concerning the consequences and desirability of such consequences of performing the behavior, and subjective norms concerning the behavior, which are a function of beliefs concerning what important referents think about the behavior and ones motivation to comply with those referents. A good deal of empirical research has supported this model, especially the critical role of intentions (Kim and Hunter, 1998). Individuals that having the behavior intention not necessary execute the intention in reality, which introduce the importance of the role of behavioral control. Ajzen (1991) defined control beliefs as the presence or absence of factors that may facilitate or impede the performance of a behavior. Perceived behavioral control is an individuals perceptions of their ability to perform a behavior based on control beliefs. Behavioral control is expected to reinforce behavioral intentions through increased perseverance and consideration of potential obstacles (Hom and Griffeth, 1995). In fact, Ajzen (1991) argues that behavior is a function of compatible intentions and perceptions of behavioral control. Perceived behavioral control should moderate the effect of intentions on behavioral control is positive. Thus, in a turnover context, turnover intentions may only lead to turnover when individuals perceive that they have control over the decision to quit. There are a number of reasons that individuals might perceive less control over this decision. Family or financial constraints could restrict mobility. Over time, individuals become increasingly invested in an organization, making it more difficult to leave (Becker, 1960). Perceptions of the availability and quality of alternatives may affect perceived control. There is some evidence perceptions of alternatives interact with job satisfaction in leading to withdrawal (Jacofsky et al, 1986). Steel et al recently suggested that barriers to mobility are critical components of labor market cognitions. However, turnover researches do not typically directly measure perceived behavioral control over turnover decisions and have not assessed control as a potential moderator of the relationship between turnover intentions and turnover. Behavioral control should moderate the intentions-turnover relationship such that the relationship is stronger when control is higher, and weaker when control is lowest. 2.1.2 Role Theory For the purpose of study, role theory is used to explain the role stress experienced by the auditors. Role theory assumes that individuals lives are spent acting out an assortment of roles both within and outside the organizational context (Fisher, 2001). As cited by Fisher (2001), Katz and Kahn explained that each of these roles is assumed to be more a function of social setting rather than of the individuals own personality characteristics. Therefore, Fisher (2001) suggested that every position within an organization can be thought of as a specific role into which an individual is socialized. Under the role episode model, the process of socialization happens when a role senders directly or indirectly communicating to the role incumbent (focal person) their expectations of the incumbents responsibilities. Role ambiguity exits when goals of ones job or methods of performing it are unclear (Johns et al, 2007). Scholars Johns et al (2007) further explained that there are three elements that can lead to ambiguity, which are (1) the organizational factors, for example the middle management might fail to provide the big picture as they are not in the upper management level; (2) the role sender, for example role senders have unclear expectations of a focal person, or the message is not effectively communicate between a role sender and a focal person; (3) the focal person, as a new staff need time to fully digest the work expectation communicated to him. On the other hand, role conflict occurs when compliance with one sent role would compliance with another difficult (Cited by Fisher (2001) from Kahn et al, 1964). Kahn et al (1964) identify five major types of role conflict as below:- 1) Intra-sender conflict conflicting prescriptions/proscriptions from the same sender 2) Inter-sender conflict conflicting prescriptions/proscriptions from different sender 3) Inter-role conflict conflict between roles in situations where an individual holds more than one role 4) Person-role conflict where an individuals role requirements are incompatible with hus/her own beliefs, values and norms 5) Role-overload reasonable expectations may have been received from role senders, but he/she may not have enough time to address them all (Cited from Fisher (2001) review on Kahn et al (1964) research work) Scholars Van Sell at al (1981), Jackson and Schuler (1985) observed that both role ambiguity and role conflict are linked to negative outcomes, such as lower job satisfaction, increase on perceived job tension, lower job performance and greater turnover intention. 2.2 Conceptualization of Dependent Variable Turnover refers to resignation from an organization (Lee and Liu, 2006; Johns et al, 2007). Turnover can be classified as internal and external, voluntary or involuntary (Wiley, 1993). By internal turnover, it means that an employee is transferred to another department within the same company or group of companies. On the other hand, external turnover refers to the resignation of an employee permanently and henceforth represents the cost outflow to an organization. Wiley (1993) further explained that involuntary turnover happens when an employee is terminated for just caused, for example: sickness, death, retirement due to old age; and voluntary turnover is a situation whereby the employee join another organization on his/her accord, or participate in the voluntary separation scheme. Employee is the human capital of an organization (Quote). Employees have become the important tangible asset in an organization in this new k-knowledge world, especially within the service industry. Successful and established companies such as Virgin Airline and Honda have invested substantial amount on their employees in term of training and development cost, aiming to shape their employees to maintain the competitive edge. Henceforth, an employee departure is considered a nightmare to an organization especially with the highly skilled employees such as the IT specialist and audit managers. Not only the organization is unable to recover the training cost (Quote), they also lose their competitive advantage when the highly experienced and skilled employees join another competitor firm. High turnover also experienced in the unskilled position such as in the manufacturing plant and hotel line due to the low replacement cost for unskilled employees. The ease of replacing employees for th e lower rank staff no doubt will not cause substantial loss to an organization, but will affect the service or product quality as the new employees are unfamiliar with the organizations culture and work procedures. As a result of the significance of these costs, employees turnover has been widely studied since the 1900s with the various publications of qualitative and quantitative researchers of exceeding 1500 (Munchinsy and Morrow, 1980). Given the significance of the study, the determinants of turnover intention is widely studied in various industries, such as the hotelier (Atang, 2010), manufacturing (Udo et al, 1007), teachers (Currivan, 2000) information system (IT) (Rahman, 2008; Muliawan et al, 2009) and among public accountants or auditors (Lander et al, 1993; Perryer et al, 2010; Reed et al, 1994; Viator, 2001; Law, 2005; Lui et al, 2001; Hsieh et al, 2009; Hasin and Omar, 2007). The reasons for voluntary turnover are numerous and the list of determinants is still expanding. The most common reasons given by leavers are due to job dissatisfaction, lacking of career growth opportunities, poor relationship between supervisor and subordinate, to name a few. Khatri et al (2001) studied high turnover in Asian countries with sample size of 422 taken from food and beverage industry, shipping and marine industry and retailing industry suggested that the main reasons for high turnover were procedural justice and low org anizational commitment. The researchers also reported that managers had more turnover intention than non-managers and procedural justice was considered more important than the distributive justice, while organizational commitment was found to be very critical in turnover intention. Job satisfaction, organizational commitment and intention to leave are among the most commonly proposed antecedents to turnover (Tett and Meyer, 1993). The reasons of having turnover intention might vary based on individualistic (Atang, 2010). The recent research noted that researchers used other new variables sust as employees personality (Dole and Schroeder, 2001; Hsieh et al, 2009), hardiness (Law, 2005), gender (Reed et al, 1994) and organizational tenure (Udo et al, 1997) to determine the moderating effect on the turnover intention. It is observed that there are not many research done in the local setting and hence it is doubtful that if those results obtained from the Western countries can be generalized in Asia, in particular, Malaysia. Henceforth, the primary focus of this study is to examine the relationship between role stress and job satisfaction towards turnover intention amongst the auditors in Sabah, using organizational commitment as mediating variable. In the academic writing, most of the research that focus on employee turnover used direct determinant of turnover, intent to stay (Iverson, 1992; Price 1997) or turnover intention (Perryer et al, 2010; Hsieh et al, 2009; Rahman et al, 2008) to predict turnover as the data of actual turnover is typically hard to collect. Intent to stay (or leave) is defined as employees behavioral intention that has been found to have a strong negative influence on actual turnover (Iverson, 1992). A link between behavioural intentions and behavior has been well documented in the social psychological literature (Ajzen and Fishbein, 1980), as has a link between turnover intentions and turnover (Irvine and Evans, 1995; Richer et al, 2002; Tett and Meyer, 1993). Richer at al (2002) further commented that most employees having the intention to leave their job would most likely to quit if they have the choice. Other researchers agreed that behavioral intention is the most determinant of actual behaviour (Aj zen and Fishbein, 1980; Steel and Ovalle, 1984) and Rasch and Harrell (1990) further commented that there is positive relationships exist between intention to leave and turnover behaviour. The finding that turnover intention is the strongest predictor of turnover is similarly consistent (Meyer at at., 2002; Tett and Meyer, 1993). The turnover intention for this present study will be conceptualized as the having the intention or behavior to leave the organization voluntary (Atang, 2010). Based on the above discussion, turnover intention would be used interchangeable with Intent to stay (or leave). 2.3 Independent variables For the purpose of this study, role stress and job satisfaction are chosen as the independent variables that are most representing determinants in influencing the turnover intention amongst auditors in Sabah. 2.3.1 Role Stress Role stress is identified as stressors at individual level (Ivancevich et al, 2008) and has now becomes the focus point of the Organizational Behavior and Management study due to the importance of having a quality work-life balance. Under role theory (as explained in Section 2.1), stress can arise from a particular role episode when sent roles conflict with each other, or when information required to effectively carry out a sent role is lacking (Fisher, 2001). These situations are known as role ambiguity and role conflict. A role is a set of expectations on individual behavior due to his/her position in an organization (Lee, 1996). Role ambiguity and role conflict are typically viewed as a consequence of audit structure practice (Wittayapoom and Mahasarakham, 2007). The definition of role ambiguity and role conflict are thoroughly examined as below:- 2.3.1.1 Role Ambiguity Role ambiguity happens when an individual is unclear about the expectations or requirements of his/her job (Hitt et al, 2006). This includes ambiguity on the methods to be used, how performance is evaluated, an individuals responsibility and also the limits of ones authority (Johns et al, 2007). Black (1988) stated that role ambiguity happens when there is a lack of the necessary information available to a given organizational position. Smith (1990) in his review on Senatras (1988) study noted that 70 percent and 47 percent of reported role ambiguity in men and women respectively was attributed to organizational factors, such as adequacy of authority to make decisions and formalization of firm policies. Ambiguity on the audit work creates tension and anxiety, and hence leads to emotional stress, as employees are unclear of the expectations. Many of audit juniors experience role ambiguity, as they are unfamiliar with the work procedures and companys culture. Besides, different audit e nvironment warrants different attention from the audit staff, for example, the audit of a financial institute is different from auditing a non-profit organization. Henceforth, a new comer would easily feel lost and frustrated if there is no proper guidance and this might affect his/her work commitment or trigger the turnover intention. Vaitor (2001) in his research finding on public accounting organizations in United States concluded that informal mentors do indeed help to reduce role ambiguity among the audit staff. Ambiguity tends to decrease as length of time in the job role increases (Jackson and Schuler, 1985, as cited by Johns et al, 2007). 2.3.1.2 Role Conflict Role conflict is termed as the degree of incongruity or incompatibility of expectations associated with the role (House and Rizzo, 1972; Johns et al, 2007). Atang (2010) stated that employees perceive a role conflict when there is incompatibility between expectations and demands from various workgroups and conflicting role to be carried out by individual employee. Katz and Kahn (1978) explained in detail that conflict is the simultaneous occurrence of two or more role sending such that agreement with one party would make more difficult for the agreement of another (see details on Section 2.1 on role theory). For example, auditor A is assigned to work on an outstation assignment by his direct supervisor, but is requested to attend a training course as requested by the human resource manager for the same working week. Hence, auditor A is said having a role conflict. Viator (2001) suggested two types of role conflict that is relevant in the accounting practice, namely the inter-sender, which occur when the expectations of one role sender are in conflict with another role senders; and the person-role conflict, which happen when the role requirements violate the needs, capacities or beliefs of the individual (Viator, 2001). Sorenson and Sorenson (1974) operationalized role conflict as conflict between an auditors professional and bureaucratic orientations. Role conflict is arguably more severe experienced with female due to the society perception that woman is the primary care-givers (Law, 2010). For example, married women with first-born children are expected to stay in-house to nurse the baby, while her career may become less priority. This perception would cause stress to career women today who valued their job above all. The significance of role conflict is discussed in Smith (1990) studies in his review on Senatras (1988) research work, which stated that organizational stressors accounted for 64 percent of the reported role conflict among males, 79 percent among females. The factors that resulted in role conflict for both man and female that identified in the study are excessive job and time pressures, conflicting objectives, and suppression of relevant information (Senatra(1988) as cited by Smith (1990) studies). 2.3.1.3 Empirical Evidence of Role Stress in the Accounting Profession As cited by Fisher (2001), Senatra (1980) was the first study in the accounting literature to examine the sources of role stress with public accounting firms. Senatra identified ten specific elements of the organizational climate of the public accounting firms in which he hypothesized would affect perceptions of role ambiguity and role conflict, which were(1) violations in the chain of command; (2) formalization of firm rules and procedures; (3) emphasis on subordinate personnel development; (4) tolerance of error; (5) top-management receptiveness to ideas and suggestions; (6) adequacy of work coordination; (7) timeliness of superiors responses to problems; (8) information suppression by superiors and subordinates; (9) adequacy of authority; (10) adequacy of professional autonomy. Using a survey of 88 senior accountants, Senatra (1980) concluded that violations in the chain of command tends to increase both role ambiguity and role conflict. For the purpose of this study, role ambiguity is defined as the lack of clear and precise information regarding what is expected of the role incumbent (Muliawan et al, 2009), which is important to perform the job (Rizzo et al, 1970). Role conflict refers to occasions when an individual receives conflicting information or requests (Muliawan et al, 2009) when there is incompatibility between expectations and demands from various workgroups (Harris et al, 2006).

Jhumpa Lahiri’s Interpreter of Maladies Essay

The Third and Final Continent is the last short story in Jhumpa Lahiri’s Interpreter of Maladies; and is probably the most memorable one. A newly married young man makes his way from India to England and then to the US where he is making arrangements to call his wife from back home. Lahiri’s tone from the very beginning sounds distant, but equally engaging, her style is painfully simple; and the structure of the story is as clear as the title. Lahiri gives an account of one man’s journey through three different continents. The story becomes captivating from the very first paragraph. She describes the narrator’s experiences in England where he lives with other â€Å"penniless Bengali bachelors all struggling to educate and establish themselves abroad [1].†   But our protagonist is offered a job at M.I.T and decides to settle down in the U.S. Here is when the story truly picks up momentum. Even with her simple style, Lahiri has also employed a strong underlying sense of humor. On his way to America, the narrator discovers that â€Å"President Nixon had declared a national holiday: two American men had landed on the moon [1].† The line is almost comical; the narrator is most uninterested in one of the greatest achievements in American history. Lahiri succeeds in describing America through the eyes of a foreigner to a new land. The narrator’s experience in America is a totally alien. Lahiri describes the new life and world around him in great detail, giving long descriptions of the food, clothes and the general attitude of people. And then the story moves on to Mrs. Croft. The relationship that follows is humorous yet endearing and heart-warming. In fact, here is where Lahiri’s genius lies. Mrs. Croft and the narrator come from two different diverse cultures and lives, yet no culture, race or color seem to come in between their friendship. Lahiri also brings forward the custom of arranged marriages, largely prevalent in India. â€Å"I regarded the proposition with neither objection nor enthusiasm. It was a duty expected of me, as it was expected of every man [1].† Even though he does not know his wife when the two get married, they begin to understand each other slowly. In fact, their first moment of understanding is in Mrs. Croft’s parlor, where the old woman calls Mala â€Å"A perfect lady [1].† â€Å"I like to think of that moment in Mrs. Croft’s parlor as the moment when the distance between Mala and me began to lessen [1].† The style and structure of Lahiri’s story are effortless and straight-forward. The words used too are simple. But it is exactly this simplicity which makes the story so close to life. The narrator’s tone is so disengaged from the story that it seems like a bland narration. Yet the events in that narration are so moving and heartening that it makes the reader feel like a part of the story. The forms a deep bond with his wife, initially, a complete stranger; and through the two the reader can see and experience the pain of losing one’s cultural identity and heritage. Their son is completely Americanized and has no interest in his Bengali roots. They wish that would â€Å"eat rice with us with his hands, and speak in Bengali, things we sometimes worry he will no longer do after we die [1].† Lahiri ends the story beautifully, describing the narrator’s journey through life in a few simple lines – â€Å"Still, there are times I am bewildered by each mile I have travelled, each meal I have eaten, each person I have known, each room in which I have slept. As ordinary as it all appears, there are times when it is beyond my imagination [1].† Works Cited: Lahiri, Jhumpa, The third and final continent, retrieved from http://www.dequinix.com/a/continent.php

Need for Security Essay

Security and control is needed in a custodial environment as people are sent there for a reason so if they were allowed to do whatever they want then it wouldn’t be a punishment. An advantage of having control is that the staff will always have authority over the prisoners, which is vital as they must be able to enforce discipline. Another advantage of having control is that they can keep an account of offences that prisoners have committed. This will come in useful if the prisoner has adjudication, it will also come in usual when reviewing the prisoner. Having the IEP scheme in a prison is a good thing as it encourages the prisoners to behave, this will make security and control easier to manage as the prisoners aren’t doing things they shouldn’t be. It will also make prison life for the prisoners more enjoyable, which is an advantage as it’s another reason why they won’t misbehave. Searches are needed in prisons to ensure that prisoners aren’t in possession of any prohibited items, if they do have this then it could lead to potentially dangerous situations. An example of this is if a prisoner has a weapon then they may use this against other prisoners or against staff. It is also important that searches are carried out on visitors of the prison as they will try their hardest to smuggle items in for prisoners. This is an advantage as it prevents prisoners from having things that shouldn’t, having an item like drugs will lead to gangs within the prison and this is something that must be avoided. Another aspect of security which is a big advantage to the prisoners and the officers is the dynamic side of security. Prisoner officers monitor the prisoners to ensure that they are coping with life in prison; if they aren’t coping well at all it could lead to them becoming suicidal. Prisoners could self-harm or even commit suicide if the prison officers aren’t keeping an eye on them. It is the duty of the prison officer to ensure that they look after the prisoners so letting this happen would mean they aren’t carrying out their job efficiently. Having dynamic security is a big advantage as it stops this from happening.

Study On Sensitivity Analysis And Financial Models Finance Essay - Free Essay Example

Sample details Pages: 6 Words: 1740 Downloads: 2 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? Sensitivity analysis is used to determine how sensitive a model is to changes in the value of the parameters of the model and to changes in the structure of the model. Inthis paper, we focus on parameter sensitivity. Parameter sensitivity is usually performedas a series of tests in which the modeller sets different parameter values to see how achange in the parameter causes a change in the dynamic behaviour of the stocks. Don’t waste time! Our writers will create an original "Study On Sensitivity Analysis And Financial Models Finance Essay" essay for you Create order Byshowing how the model behaviour responds to changes in parameter values, sensitivityanalysis is a useful tool in model building as well as in model evaluation. Sensitivity analysis helps to build confidence in the model by studying theuncertainties that are often associated with parameters in models. Many parameters insystem dynamics models represent quantities that are very difficult, or even impossible tomeasure to a great deal of accuracy in the real world. Also, some parameter valueschange in the real world. Therefore, when building a system dynamics model, the modelleris usually at least somewhat uncertain about the parameter values he chooses and must useestimates. Sensitivity analysis allows him to determine what level of accuracy is necessaryfor a parameter to make the model sufficiently useful and valid. If the tests reveal that themodel is insensitive, then it may be possible to use an estimate rather than a value withgreater precision. Sensitivity analysis can also in dicate which parameter values arereasonable to use in the model. If the model behaves as expected from real worldobservations, it gives some indication that the parameter values reflect, at least in part, thereal world. Sensitivity tests help the modeller to understand dynamics of a system.Experimenting with a wide range of values can offer insights into behaviour of a system inextreme situations. Discovering that the system behaviour greatly changes for a change in aparameter value can identify a leverage point in the model- a parameter whose specificvalue can significantly influence the behavior mode of the system. (https://sysdyn.clexchange.org/sdep/Roadmaps/RM8/D-4526-2.pdf) 3(a) What is Sensitivity Analysis? Sensitivity analysis is a strategy that is helpful in determining what could happen if a specific variable within a projection fails to function as originally envisioned. The idea is to identify possible deviations that could occur if one or more variables are changed or discarded, and how those changes would affect the eventual outcome. From this perspective, this type of analysis makes it possible to prepare for outcomes other than the desired goal, thus minimizing the ill effects if those variables do fail to perform or influence as anticipated. Within the process of conducting a sensitivity analysis, it is possible to look at each factor or variable that has relevance to the projected outcome. For example, if an business anticipates that launching a new product will result in an increase of twenty-five percent in annual earnings, the analysis may look at how the earnings would be affected if consumer response were only half as enthusiastic as originally predicted. As part of the development of different scenarios where a given variable failed to function as projected, the matter of an increase in the cost of raw materials may also be considered, determining what impact that increase would have on the profits earned by the new product line. While there are exceptions, a sensitivity analysis does not typically include the development of scenarios that have below a certain potential for actually coming to pass. Instead, the process focuses on identifying and projecting the outcome if certain variables that do have at least a reasonable chance of taking place should occur. For this reason, the sensitivity analysis tends to remain somewhat grounded in facts and makes use of those facts in creating the alternative scenarios. What is considered a reasonable scenario will vary somewhat from one industry to the next, and will depend a great deal on general economic conditions as well as factors that apply to the industry where the business operates and the i nternal function of the business itself. (https://www.wisegeek.com/what-is-sensitivity-analysis.htm) 3(b) Application of Sensitivity Analysis Sensitivity Analysis, in other words, is a procedure that analyses how the changes of certaininput values (income, costs, value of investments, etc.),produced due to inappropriate prediction or for someother reason, influence certain criteria values and thetotal investment project evaluation. Applying thisanalysis it is possible to analyse the maximum or minimum points which one value may take while, however, still allowing an investment project to be justified andacceptable for realization. In the investment project evaluation we have at ourdisposal a set of criteria (Net Present Value, InternalRate of Return, Pay-back Period, etc.) as the basis for evaluation (set of output values), and the set of values(income, costs, discount rate, value of investments,etc.) on the basis of which we can calculate certain individual criteria (input values), as shown by the diagram. Input Values Output Values CALCULATING VALUES FOR INDIVIDUAL CRITERIA Net Present Value Int ernal Rate of Return Payback Period (Calculation of individual criteria using input and output values) Net Present Value The Net Present Value criterion is defined as a sum ofpresent values of annual net incomes earned in theperiod of the project exploitation. Mathematical expression of this criterion is: NPV= ÃÆ' ¢Ãƒâ€¹Ã¢â‚¬  Ãƒ ¢Ã¢â€š ¬Ã‹Å"ÃÆ' ¢Ãƒâ€šÃ‚ Ãƒâ€šÃ‚ ¿ value (1+rate) value net cash flow occurs at the end of each period i rate discount rate used to discount the cashflow n time period of the project The word net in net present value indicates that our calculation  includes the initial costs as well as the subsequent profits. It also reminds  us that all the amounts in the income stream are net profits, revenues  minus cost. In other words, net means the same as total here. (https://hadm.sph.sc.edu/courses/econ/invest/invest.html) Internal Rate of Return one of the uses of IRR  is by  corporations that wish  to compare capital projects.  For example, a corporation will evaluate an investment in a new plant versus anextension of an existing plant based on the IRR of each project. In such a case, each new capital project must produce an  IRR that is  higher than the companys  cost of capital. Once this hurdle is surpassed, the project with the highest IRR would be the wiser investment, all other things being equal (including  risk). IRR is also useful for corporations in evaluating stock  buyback  programs. Clearly, if a company allocates a substantial amount to a stock buyback, the analysis must show that the companys own stock is a better investment (has a higher IRR) than any other use of the funds for other capital projects, or than any acquisition candidate at current market prices. Calculating IRR The simplest example of computing an IRR is by using the example of a mortgage with even payments. Assume an initial mortgage amount of  £200,000 and monthly payments of  £1,050 for 30 years. The IRR (or implied  interest rate) on this loan annually is 4.8%.  Because the a stream of  payments  is equal and spaced at even intervals, an alternative approach is to discount these payments at a 4.8% interest rate, which will produce a net present value of  £200,000. Alternatively, if the payments are raised to, say  £1,100, the IRR of that loan will rise to 5.2%. The formula for IRR, using this example, is as follows: Where the initial payment (CF1) is  £200,000 (a positive inflow) Subsequent cash flows (CF  2, CF  3, CF N) are negative  £1050 (negative because it is being paid out) Number of payments (N) is 30 years times 12 = 360 monthly payments Initial Investment is  £200,000 IRR is 4.8% divided by 12 (to equate to monthly payments) = 0.400%   Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€š Payback Period(PBP) Payback Period  is a financial metric that answer the question: How long does it take for  an investment to pay for itself? Or, how long does it take for incoming retuns to cover costs? Or, put still another way: How long  does it take for  the investment to  break even? Like other financial metrics such as  Ãƒâ€šÃ‚  internal rate of return (IRR)  and return on investment (ROI),  payback period  takes essentially an Investment view of the action, plan, or scenario and its estimated  cash flow  stream.  Each of these metrics compares investment costs to investment returns in one way or another.  Payback period is the length of time required for cumulative incoming returns to equal the cumulative costs of an investment (e.g. purchase of computer software or hardware, training expenses, or new product development), usually measured in years. Other things being equal, the investment with th e shorter payback period is considered the better investment.  The shorter payback period is preferred because: The investment costs are recovered sooner  and are available again  for further use. A  shorter payback period is viewed as  less risky. It is usually assumed that the longer the payback period, the more uncertain are the positive returns. For this reason, payback period is often used as a measure of risk, or a risk-related criterion that must be met before funds are spent. A company might decide, for instance, to undertake no major investments or expenditures that have a payback period over, say, 3 years. Conclusion There is clearly much more to the use of a decision support model than finding a single optimal solution. That solution should be viewed as the starting point for a wide ranging set of sensitivity analyses to improve the decision makers knowledge and understanding of the systems behaviour. Even without undertaking the relatively complex procedures which explicitly involve probabilities in the sampling of scenarios or interpretation of results, sensitivity analysis is a powerful and illuminating methodology. The simple approach to sensitivity analysis is easy to do, easy to understand, easy to communicate, and applicable with any model. As a decision aid it is often adequate despite its imperfections. Given its ease and transparency, the simple approach to SA may even be the absolute best method for the purpose of practical decision making. Sensitivity analysis is an important tool in the model building process. By showingthat the system does not react greatly to a change in a parameter value, it reduces themodelers uncertainty in the behavior. In addition, it gives an opportunity for a betterunderstanding of the dynamic behavior of the system. Sensitivity analysis  investigates what happens to the NPV and IRR of the project when one or more variables change. The idea is that we freeze all the variables except the one(s) analyzed and check how sensitive the NPV and/or the IRR are to changes in that variable. (https://cyllene.uwa.edu.au/~dpannell/dpap971f.htm)