A life cycle analysis is important when evaluating acompany or industry. A company’s life cycle is the movement that the companyhas been doing since it was created. You can estimate a company’s stage withinthe life cycle by looking at the statement of cash flow of the respectivecompany. There are four stages of the life cycle: introductory, growth, maturityand decline. In the introductory stage, the company is very young and are mostlikely not generating a great deal of revenue. Their investment operations will have a negative cash flow because theyare making major investments such as R&D to develop the product.
Cash flowfrom financing operations will be positive due to the company taking out loansand other activities to get cash to operation the business. During the growth stage,cash flow activities start to change. The financial cash flow starts decliningas they generating more revenue from overall operations and the need for loansdecreases. When it is in the maturity stage, that is when sales and cash flowfrom investing start to reach its peak.
Financing activities are declining aswell. When a company is in their decline stage, it means that company is slowlyending. All aspects of the statement of cash flows are in the dropping. Afterlooking at Textron’s statement of cash flows, I believe that they are in thegrowth stage of the life cycle.
Over the last three years, Textron’s cash flowfrom operations has increased which is great because it means that they aregrowing. Their investing cash flows arestill negative. That is because Textron is growing and have to spending onresearch and development to stay competitive in the market and maintain steadygrowth. A key factor why I believe they are in the growth stage is becausetheir cash flow for financing activities has gone from positive to negative.
I wouldsay that Textron’s life cycle stage matches my life and career stage. I amstill young and learning a lot. I haven’t figured out exactly what I want to dobut I believe that personal and financial growth is important if I want tofigure out exactly I want to do in my career.