Udaya Raj Adhikari's Blog

Impact of the corporate life cycle on a company’s cash flows  All the product go through a series of phases called the product life cycle .The phases 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 weakening in consumer demand. As in the following diagram, the phase a company is in effects its cash flows.   In the first 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

Funds flow statement Vs Cash flow statement The differences are as follows: Funds flow statement Cash flow statement 1. It is based on accrual accounting system. 1. While preparation of this statement, all transaction effecting the cash and cash equivalents are taken into consideration. 2. It analysis the sources and application of funds of long-term nature and net increase or decrease in long term funds will be reflected on working capital of the firm, 2. It considers only the increase or decrease in current assets and current liabilities in calculating the cash flow from operations. 3. More useful in long range planning. 3. More useful for identifying and correcting the current liquidity problems of the firm. 4.Sound fund position does not necessarily mean sound cash operation 4. Sound cash operation is always followed by sound fund position. 5. It shows the funds generated a