A company in the growth phase of its product life cycle will normally have which of the following patterns of cash flows?
A) Negative cash flows from operations, negative cash flows from investing and positive cash flows from financing.
B) Negative or positive cash flows from operations, negative cash flows from investing and positive cash flows from financing.
C) Positive cash flows from operations, positive cash flows from investing and positive cash flows from financing.
D) Negative or positive cash flows from operations, negative cash flows from investing and negative cash flows from financing.

Question

Quizplus · Accepted Answer

In the growth phase, a company is often investing heavily in its product or service to expand its market share. This means that it may have negative cash flows from operations due to high expenses, but it may also have positive cash flows from operations if it is generating significant revenue. The company is likely to have negative cash flows from investing as it spends money on research and development, marketing, and acquiring additional assets. However, it may have positive cash flows from financing as investors and lenders recognize the potential for growth and invest in the company. Thus, the most likely pattern of cash flows for a company in the growth phase is negative or positive cash flows from operations, negative cash flows from investing, and positive cash flows from financing. Hence, option B is the correct answer.

A Company in the Growth Phase of Its Product Life