The Corporate Life Cycle

The Corporate Life - phases because the majority of its products are in a particular phase Illustration 12-3 shows that the phase a company is in

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The Corporate Life Cycle All products go through a series of phases called the product life cycle . The phases (in order of their occurrence) are: introductory phase , growth phase , maturity phase , and decline phase . The introductory phase occurs at the beginning of a company's life, when it is purchasing fixed assets and beginning to produce and sell products. During the growth phase, the company is striving to expand its production and sales. In the maturity phase, sales and production level off. During the decline phase, sales of the product fall due to a weakening in consumer demand. If a company had only one product and that product was nearing the end of its salable life, we could easily say that the company was in the decline phase. Companies generally have more than one product, however, and not all of a company's products are in the same phase of the product life cycle at the same time. Still, we can characterize a company as being in one of the four
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Unformatted text preview: phases, because the majority of its products are in a particular phase. Illustration 12-3 shows that the phase a company is in affects its cash flows. In the introductory phase , we expect that the company will not be generating positive cash from operations. That is, cash used in operations will exceed cash generated by operations in the introductory phase. Also, the company will be spending considerable amounts to purchase productive assets such as buildings and equipment. To support its asset purchases the company will have to issue stock or debt. Thus, during the introductory phase we expect cash from operations to be negative, cash from investing to be negative, and cash from financing to be positive. Illustration 12-3 Impact of product life cycle on cash flows...
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 201 taught by Professor - during the Spring '11 term at Montgomery.

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The Corporate Life - phases because the majority of its products are in a particular phase Illustration 12-3 shows that the phase a company is in

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