At different points in their existence, companies will have different cash inflow and outflow requirements. Such differences make intercompany comparisons difficult, even within the same industry. Required:
a. Consider a start-up company in the software development industry. What might its operating, investing, and financing cash flows look like in general? Provide examples where appropriate.
b. Consider a mature auto dealership. What might its operating, investing, and financing cash flows look like in general? Provide examples where appropriate.
a.A start-up company in the software industry would probably not be generating a great deal of cash inflows from its operations. However, it may incur moderate to significant cash outflows from its operations as it strives to develop and market its products. The overall cash flow from operations would be negative. The start-up company would probably not have significant cash inflows or outflows from investing activities. Minimal long-term assets need to be acquired for a business that is primarily human capital based. Most of the cash inflows for the start up would probably come from financing activities (sometimes in a large sum after an initial public offering or significant investment from a strategic partner).
b.A mature auto dealership would probably be generating a great deal of cash inflows from its operations (assuming stable operations). However, it may also incur significant cash outflows from its operations due to the relatively high cost of its products. The dealership would probably have significant cash inflows from its investing activities if it were very successful. Cash outflows from investing activities would probably be moderate to significant as it acquires equipment for the dealership. Some cash outflows would probably be to pay back initial financing. If expansion and growth were a strategy for the dealership, then more cash outflows would probably be incurred for investing activities. Cash inflows from financing activities would also exist.
You might also like to view...
Giorgio had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover equals:
A. 76.1 days. B. 4.79. C. 0.21. D. 4.51. E. 80.9 days.
After several months of training, the Air Force Special Operations team has developed high loyalty and trust, and there are clear patterns of communications among the members. The Special Operations team is in which stage of group development?
A. forming B. storming C. norming D. performing
Slides in a report deck ________
A) should each communicate a clear and complete point B) have less text on them than a traditional presentation slide C) include headlines with periods at the end D) should not use graphics E) include headlines that are centered and have every word capitalized
Choose the correct word or words in parentheses. The soup tastes (good, well)