Companies go through different phases of the life cycle. Corporate life cycle includes introductory, growth, maturity, and decline phases.
Discuss each phase of corporate life cycle.
Describe the effects of each phase on the amounts reported in a statement of cash flows. Be sure to support your position.
Phases of corporate life cycle
The business life cycle is the progression of a business in phases over time. Every business goes through four phases: startup/introductory, growth, maturity, and renewal/rebirth or decline. The introduction stage is the first stage in the product life cycle where the company tries to build awareness about the product or service in a market where there is less or no competition. Pricing a product in the introduction stage is very important to gain market share. During the growth phase, companies start seeing a profit and positive cash flow, which evidences their ability to repay debt. Companies at the growth stage seek more and more capital as they wish to expand their market reach and diversify their businesses. The maturity stage shows that sales will eventually peak and then slow down. Profit margins get thinner, while cash flows stay relatively stagnant. In the final stage of the business life cycle, sales, profit, and cash flow all decline.