What is a primary limitation of the payback period method?

The payback period method is primarily used to determine how long it will take for an investment to generate enough cash flows to recover its initial cost. One of its fundamental limitations is that it does not consider future net cash flows beyond the payback period. This means that any cash flows that occur after the initial investment has been recovered are completely disregarded.

This aspect is critical because it can lead to an incomplete analysis of an investment's overall profitability. Essentially, an investment could recover its costs quickly but may not yield substantial returns thereafter. On the other hand, an investment that takes longer to pay back might produce significant cash inflows in the long run. By not accounting for all future cash flows, the payback period can present a skewed view of an investment's potential financial viability.

The other options do not directly relate to the core issue of the payback period's capacity to evaluate long-term profitability, making them less relevant in this context.