A company has the following cash flows:

Question

Cash from operations (30)

Cash from investing activities (45)

Cash from financing activities 90

Which growth stage best describes this pattern of cash flows?

Fossilized

Decline

Early growth

Start-up

Mature

1 point
4.
Question 4
A company

Answer 1

To analyze the cash flows:

1. Cash from operations: -30 (negative cash flow indicates that the company is not generating enough cash from its core business operations).
2. Cash from investing activities: -45 (negative investment cash flow suggests the company is investing heavily, likely in growth opportunities).
3. Cash from financing activities: +90 (positive cash flow from financing indicates the company is raising capital, possibly through debt or equity, to fund its operations or investments).

Based on this cash flow pattern:

• The negative cash flow from operations suggests the company is struggling to generate profit.
• The negative cash flow from investing activities often implies that the company is in a growth phase and is investing in assets for future growth.
• The positive cash flow from financing activities suggests the company is seeking external funding to support its operations and investments.

The combination of these factors points to the company being in the Early Growth stage. This stage typically involves heavy investment and capital raising while the company is not yet generating sufficient cash from operations.

Thus, the best growth stage that describes this pattern of cash flows is Early Growth.