Growth - Growth, maturity, and decline phase. During the...

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Growth, maturity, and decline phase. During the growth phase , we expect to see the company start to generate small amounts of cash from operations. During this phase, cash from operations on the statement of cash flows will be less than net income on the income statement. One reason income will exceed cash flow from operations during this period is explained by the difference between the cash paid for inventory and the amount expensed as cost of goods sold. Since the company projects increasing sales, the size of inventory purchases must increase. Thus, in the growth phase the company will expense less inventory on an accrual basis than it purchases on a cash basis. Also, collections on accounts receivable will lag behind sales, and accrual sales during a period will exceed cash collections during that period. Cash needed for asset acquisitions will continue to exceed cash provided by operations, requiring that the company make up the deficiency by issuing new stock or debt. Thus, in the growth phase, the company continues to show negative cash from investing and
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Growth - Growth, maturity, and decline phase. During the...

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