The product life cycle and cash flow...
- During the development stage, money will be spent, but no money will be made from sales. So, cashflow will be negative.
- At launch, cash flowing out of the business is still likely to be more than that flowing in, so cash flow will be negative. Sales have yet to take off, and a business may be spending on promotion.
- In the growth period, eventually revenue from the product will be greater than spending and so cash flow becomes positive. This is because sales will be increasing and average costs may be falling as output increases.
- In the maturity stage cash flow will be at its highest. The product will be earning its greatest revenue.
- In the decline stage, sales will fall and so cash flow will decline.