Question

In which phase of the corporate life cycle will a company’s operating activities start to generate small amounts of cash, investing activities will have negative cash flows, and financing activities will have positive cash flows?

		Introductory phase.
		Growth phase.
		Decline phase.
		Maturity phase.

Answer 1

Ans:

Under Introductory Phase an Business will have operating activities start to generate small amounts of cash, investing activities will have negative cash flows, and financing activities will have positive cash flows because when we start a business we introduce funds to the business. To introduce funs we need to raise capital or borrow money, which will make positive cash flows from Financing Activities. Secondary when we start a business, we need capital assets like Furniture, Machinery, Equipments. Therefore it will make negative cash flows from Investing activities. Finally on startup phase small operating income generates from business.

Therefore correct answer is Option A.

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