Now I get confused if I got 2 projects and the payback period of the first project is less than the second one but the rate of the second project is high should I choose the second one?
For A-Level business exams, this is something you will be able to analyse in your answer. Firstly, you will need to make your decision on the best project based on one of the ratios you have calculated, but then state that although this seems like a good idea, looking at a different ratio calculation, this could be incorrect and that the business will need to consider both ratios in order to make the most effective decision. Also, the decision you make based on the ratios will depend on the type of business it is, eg. if business needs high liquidity and cash in hand, you might make the decision that the payback period would be best to base your decision on because they will be able to predict when they receive the initial investment capital back. I hope this makes sense (if not then feel welcome to ask another question)!