Product life cycle: Every corporation in its operational life cycle has to pass through various phases known as “Product life cycle”. There are various stages of product life cycle like introductory phase, Growth phase, maturity phase and decline phase. Introductory phase: In this stage, there will be negative cash flow from operations as the cash is used in operations will be higher than the cash provided by the business operations. The cash flow from the activities like operating activities, investing activities will be negative. Growth phase: In this stage, the company generates certain amount of cash for running the business operations. In this stage, the net income will be higher than the cash flow from operating activities. Maturity phase: In this stage, the volume of sales will be at its highest peak. In this stage, net income and cash flow from operating activities will be almost similar. The cash flow from operating activities will be higher. Therefore the company will plan to pay dividends to its shareholders’ or redeem a debt or even plan for buyback of its stock. Decline phase: In this stage, the profits and volume of sales starts to decline or decrease. The cash flow from operating activities also decreases. Therefore the cash flow from financing activities might be negative as it pays for dividend and buy back of stock. But cash flow from investing activities might be positive as the company would try to increase its cash inflow by way of selling its assets and investments. To explain: The reason why the cash provided by operating activities likely to be lower than net income during the growth phase.

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Answer 1

Question

Chapter 12, Problem 12.8BE

(a)

To determine

Product life cycle:

Every corporation in its operational life cycle has to pass through various phases known as “Product life cycle”. There are various stages of product life cycle like introductory phase, Growth phase, maturity phase and decline phase.

Introductory phase:

In this stage, there will be negative cash flow from operations as the cash is used in operations will be higher than the cash provided by the business operations. The cash flow from the activities like operating activities, investing activities will be negative.

Growth phase:

In this stage, the company generates certain amount of cash for running the business operations. In this stage, the net income will be higher than the cash flow from operating activities.

Maturity phase:

In this stage, the volume of sales will be at its highest peak. In this stage, net income and cash flow from operating activities will be almost similar. The cash flow from operating activities will be higher. Therefore the company will plan to pay dividends to its shareholders’ or redeem a debt or even plan for buyback of its stock.

Decline phase:

In this stage, the profits and volume of sales starts to decline or decrease. The cash flow from operating activities also decreases. Therefore the cash flow from financing activities might be negative as it pays for dividend and buy back of stock. But cash flow from investing activities might be positive as the company would try to increase its cash inflow by way of selling its assets and investments.

To explain: The reason why the cash provided by operating activities likely to be lower than net income during the growth phase.

(b)

To determine

To explain: The reason why the net cash from investing activities are positive during late maturity phase and during decline phase.

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Students have asked these similar questions

IDENTIFY THE EFFECT OF THE FOLLOWING TRANSACTION TO THE RISK OF MATERIAL MISSTATEMENT TO FINANCIAL STATEMENTS. The company has shown an ability to generate a positive cash flow from operations, while reporting earnings and earnings growth. Does it have a: A. INCREASE effect B. DECREASE effect C. NO EFFECT effect

True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans?

Which of the following is not a use of the statement of cash flows? a. Aids in the prediction of future cash flow. b. Provides a measure of the future obligations of the company. c. Helps estimate the amount of funds that will be needed from creditors or shareholders. d. Provides insights into the quality and reliability of reported income.

Answer 2

Question

Chapter 12, Problem 12.8BE

(a)

To determine

Product life cycle:

Every corporation in its operational life cycle has to pass through various phases known as “Product life cycle”. There are various stages of product life cycle like introductory phase, Growth phase, maturity phase and decline phase.

Introductory phase:

In this stage, there will be negative cash flow from operations as the cash is used in operations will be higher than the cash provided by the business operations. The cash flow from the activities like operating activities, investing activities will be negative.

Growth phase:

In this stage, the company generates certain amount of cash for running the business operations. In this stage, the net income will be higher than the cash flow from operating activities.

Maturity phase:

In this stage, the volume of sales will be at its highest peak. In this stage, net income and cash flow from operating activities will be almost similar. The cash flow from operating activities will be higher. Therefore the company will plan to pay dividends to its shareholders’ or redeem a debt or even plan for buyback of its stock.

Decline phase:

In this stage, the profits and volume of sales starts to decline or decrease. The cash flow from operating activities also decreases. Therefore the cash flow from financing activities might be negative as it pays for dividend and buy back of stock. But cash flow from investing activities might be positive as the company would try to increase its cash inflow by way of selling its assets and investments.

To explain: The reason why the cash provided by operating activities likely to be lower than net income during the growth phase.

(b)

To determine

To explain: The reason why the net cash from investing activities are positive during late maturity phase and during decline phase.

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Answer 3

Question

Chapter 12, Problem 12.8BE

(a)

To determine

Product life cycle:

Every corporation in its operational life cycle has to pass through various phases known as “Product life cycle”. There are various stages of product life cycle like introductory phase, Growth phase, maturity phase and decline phase.

Introductory phase:

In this stage, there will be negative cash flow from operations as the cash is used in operations will be higher than the cash provided by the business operations. The cash flow from the activities like operating activities, investing activities will be negative.

Growth phase:

In this stage, the company generates certain amount of cash for running the business operations. In this stage, the net income will be higher than the cash flow from operating activities.

Maturity phase:

In this stage, the volume of sales will be at its highest peak. In this stage, net income and cash flow from operating activities will be almost similar. The cash flow from operating activities will be higher. Therefore the company will plan to pay dividends to its shareholders’ or redeem a debt or even plan for buyback of its stock.

Decline phase:

In this stage, the profits and volume of sales starts to decline or decrease. The cash flow from operating activities also decreases. Therefore the cash flow from financing activities might be negative as it pays for dividend and buy back of stock. But cash flow from investing activities might be positive as the company would try to increase its cash inflow by way of selling its assets and investments.

To explain: The reason why the cash provided by operating activities likely to be lower than net income during the growth phase.

(b)

To determine

To explain: The reason why the net cash from investing activities are positive during late maturity phase and during decline phase.

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 12.8BE

(a)

To determine

Product life cycle:

Every corporation in its operational life cycle has to pass through various phases known as “Product life cycle”. There are various stages of product life cycle like introductory phase, Growth phase, maturity phase and decline phase.

Introductory phase:

In this stage, there will be negative cash flow from operations as the cash is used in operations will be higher than the cash provided by the business operations. The cash flow from the activities like operating activities, investing activities will be negative.

Growth phase:

In this stage, the company generates certain amount of cash for running the business operations. In this stage, the net income will be higher than the cash flow from operating activities.

Maturity phase:

In this stage, the volume of sales will be at its highest peak. In this stage, net income and cash flow from operating activities will be almost similar. The cash flow from operating activities will be higher. Therefore the company will plan to pay dividends to its shareholders’ or redeem a debt or even plan for buyback of its stock.

Decline phase:

In this stage, the profits and volume of sales starts to decline or decrease. The cash flow from operating activities also decreases. Therefore the cash flow from financing activities might be negative as it pays for dividend and buy back of stock. But cash flow from investing activities might be positive as the company would try to increase its cash inflow by way of selling its assets and investments.

To explain: The reason why the cash provided by operating activities likely to be lower than net income during the growth phase.

(b)

To determine

To explain: The reason why the net cash from investing activities are positive during late maturity phase and during decline phase.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 12.8BE

(a)

To determine

Product life cycle:

Every corporation in its operational life cycle has to pass through various phases known as “Product life cycle”. There are various stages of product life cycle like introductory phase, Growth phase, maturity phase and decline phase.

Introductory phase:

In this stage, there will be negative cash flow from operations as the cash is used in operations will be higher than the cash provided by the business operations. The cash flow from the activities like operating activities, investing activities will be negative.

Growth phase:

In this stage, the company generates certain amount of cash for running the business operations. In this stage, the net income will be higher than the cash flow from operating activities.

Maturity phase:

In this stage, the volume of sales will be at its highest peak. In this stage, net income and cash flow from operating activities will be almost similar. The cash flow from operating activities will be higher. Therefore the company will plan to pay dividends to its shareholders’ or redeem a debt or even plan for buyback of its stock.

Decline phase:

In this stage, the profits and volume of sales starts to decline or decrease. The cash flow from operating activities also decreases. Therefore the cash flow from financing activities might be negative as it pays for dividend and buy back of stock. But cash flow from investing activities might be positive as the company would try to increase its cash inflow by way of selling its assets and investments.

To explain: The reason why the cash provided by operating activities likely to be lower than net income during the growth phase.

(b)

To determine

To explain: The reason why the net cash from investing activities are positive during late maturity phase and during decline phase.

Answer 6

Chapter 12, Problem 12.8BE

(a)

To determine

Product life cycle:

Every corporation in its operational life cycle has to pass through various phases known as “Product life cycle”. There are various stages of product life cycle like introductory phase, Growth phase, maturity phase and decline phase.

Introductory phase:

In this stage, there will be negative cash flow from operations as the cash is used in operations will be higher than the cash provided by the business operations. The cash flow from the activities like operating activities, investing activities will be negative.

Growth phase:

In this stage, the company generates certain amount of cash for running the business operations. In this stage, the net income will be higher than the cash flow from operating activities.

Maturity phase:

In this stage, the volume of sales will be at its highest peak. In this stage, net income and cash flow from operating activities will be almost similar. The cash flow from operating activities will be higher. Therefore the company will plan to pay dividends to its shareholders’ or redeem a debt or even plan for buyback of its stock.

Decline phase:

In this stage, the profits and volume of sales starts to decline or decrease. The cash flow from operating activities also decreases. Therefore the cash flow from financing activities might be negative as it pays for dividend and buy back of stock. But cash flow from investing activities might be positive as the company would try to increase its cash inflow by way of selling its assets and investments.

To explain: The reason why the cash provided by operating activities likely to be lower than net income during the growth phase.

Answer 7

Chapter 12, Problem 12.8BE

(a)

To determine

Product life cycle:

Every corporation in its operational life cycle has to pass through various phases known as “Product life cycle”. There are various stages of product life cycle like introductory phase, Growth phase, maturity phase and decline phase.

Introductory phase:

In this stage, there will be negative cash flow from operations as the cash is used in operations will be higher than the cash provided by the business operations. The cash flow from the activities like operating activities, investing activities will be negative.

Growth phase:

In this stage, the company generates certain amount of cash for running the business operations. In this stage, the net income will be higher than the cash flow from operating activities.

Maturity phase:

In this stage, the volume of sales will be at its highest peak. In this stage, net income and cash flow from operating activities will be almost similar. The cash flow from operating activities will be higher. Therefore the company will plan to pay dividends to its shareholders’ or redeem a debt or even plan for buyback of its stock.

Decline phase:

In this stage, the profits and volume of sales starts to decline or decrease. The cash flow from operating activities also decreases. Therefore the cash flow from financing activities might be negative as it pays for dividend and buy back of stock. But cash flow from investing activities might be positive as the company would try to increase its cash inflow by way of selling its assets and investments.

To explain: The reason why the cash provided by operating activities likely to be lower than net income during the growth phase.

Answer 8

(b)

To determine

To explain: The reason why the net cash from investing activities are positive during late maturity phase and during decline phase.

Answer 9

(b)

To determine

To explain: The reason why the net cash from investing activities are positive during late maturity phase and during decline phase.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

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Answer 13

Ch. 12 - Prob. 1Q Ch. 12 - Prob. 2Q Ch. 12 - Prob. 3Q Ch. 12 - Prob. 4Q Ch. 12 - Prob. 5Q Ch. 12 - Prob. 6Q Ch. 12 - Why is it necessary to use comparative balance...Ch. 12 - Prob. 8Q Ch. 12 - Prob. 9Q Ch. 12 - Prob. 10Q

Solution Summary: The author explains that every corporation in its operational life cycle passes through various stages like introductory, growth, maturity, and decline phases.

To explain: The reason why the net cash from investing activities are positive during late maturity phase and during decline phase.

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Chapter 12 Solutions