A newly formed company with enormous growth prospects would be expected to have negative free cash flow during its start-up phase.

Question

Quizplus · Accepted Answer

During start-up phase, the company will be investing heavily in infrastructure, marketing, research and development, etc. which might not immediately generate sufficient revenue to cover the expenses, leading to negative free cash flow. However, once the company establishes itself in the market, it is expected to generate positive free cash flow as the revenue starts exceeding the expenses.

A Newly Formed Company with Enormous Growth Prospects Would Be