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Analyse the relationship between the product life cycle and cash flow.

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Introduction

Analyse the relationship between the product life cycle and cash flow The 'product life cycle' is split into 5 stages: * Research and development * Introduction * Growth * Maturity/Saturation * Decline The product life cycle is the model that represents a sales pattern for a product over a period of time. It shows the revenue by a product from is introduction to its eventual decline. There are four stages to the product life cycle: Introduction, growth, maturity and decline. Research and development is the first stage of the product life cycle. This is where a firm has a research team look in to possible new ideas and products for a business. ...read more.

Middle

The cash flow at this stage would not be very positive. A lot of money has been spent at the introduction to get the public to notice the product and to make them aware. The firm would not expect to make any profit at this stage as the product has just been launched. Growth: If the product succeeds, sales will grow. Prices could still be high but with increased competition prices will drop. The producer still advertises at a high level to fight off competition. Product starts to move into profitability. The cash flow starts to gain more revenue. ...read more.

Conclusion

Decline: Eventually the product will become less interesting for purchasers, and the decline of the product will commence. The revenue will now slowly drop but there is a possibility that the firm will not go into debt. My overall conclusion is that the relationship between the product life cycle and the cash flow are very similar. When the product life cycle starts to grow so does the cash flow as it does when the life cycle decreases. This is because If the product is selling more, than it is obviously going to have a greater cash flow. If the product is selling less then the cash flow will decrease with the product life cycle. ...read more.

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