In accordance with the nature of the business operations occurring, the cash flow of business operations can be divided into three kinds, is the cash flow from operating activities, cash flow from investing activities cash flow from financing activities.
When the net cash flow from operating activities is negative, the net cash flow from investing activities is negative, and the net cash flow from financing activities is positive, it indicates that the enterprise is in the product start-up phase. At this stage the enterprise needs to invest a lot of money to form production capacity and develop the market, and its source of funds is only debt, financing and other financing activities. When the net cash flow from operating activities is positive, the net cash flow from investing activities is negative, and the net cash flow from financing activities is positive, it can be judged that the enterprise is in a period of rapid development. At this time, the products quickly occupy the market, sales show a rapid upward trend, manifested in operating activities, a large number of money back, while in order to expand market share, the enterprise still needs a large number of additional investment, and only rely on net cash flow from operating activities may not be able to meet the required investment, it is necessary to raise the necessary external funds as a supplement. When the net cash flow from operating activities is positive, the net cash flow from investing activities is positive, the net cash flow from financing activities is negative, indicating that the enterprise enters the product maturity stage. At this stage the product sales market is stable and has entered the payback period, but many external funds need to be repaid to maintain a good degree of creditworthiness of the enterprise. When the net cash flow from operating activities is negative, the net cash flow from investing activities is positive, and the net cash flow from financing activities is negative, it can be assumed that the enterprise is in a period of decline. This period is characterized by market contraction, a decline in the market share of product sales, cash inflows from operating activities is less than outflows, while the enterprise in order to meet the debt has to be a large-scale recovery of investment in order to make up for the cash shortfall.
Accounting exam chapter knowledge points summarized, I wish you an easy license.
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