Question

1. In the typical business, are the acquisitions stage cashflows typically positive (inflows) or negative (outflows)? In addition, what about the cash flows from operations for businesses in the maturity stage of their life cycles? Inflows or outflows?

Answer 1

In the typical business the acquisition stage cash flows are typically negative in nature because at the acquisition stage business will be generating higher negative outflows so there would be a lot of acquirer company who will be wanting to acquire the business because the business will be available at the cheap valuations and it can also be derived that the business will be spending higher than required amount of money and capex in order to expand itself so there would be lower class closed due to acquisition stage. Hence there will be cash OUTFLOWS.

At the maturity stage of the life cycle, there is complete stability for the business and the cash flows are stable so there will be positive cash inflows for the company because the company will be having higher amount of receivables as it has gained the market share and it has established itself in the market so its product will be consumed by the consumers and there will be continuous cash flows for such companies as one of the features of the company is that they are going to pay a lot of dividend so dividend can only be paid by the companies were making profits. Hence there will be cash INFLOWS