Cash Flow and Early Exits Discussion

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Tnzoyvat123

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  1. Why can using a firm's working capital to discuss cash flow without further qualification be misleading?
  2. "Cash flow methodology should distinguish between a new capital intensive business and a more mature operation." Discuss.
  3. The number of companies acquired only two or three years from startup has increased dramatically in the last few years. What are the root causes of these early exits?
  4. How much is a customer worth? How much does it cost to acquire an additional one? This is the focus of Peters' plan for a successful early exit when the business model is yet to show any profit. However, investors will also have to consider other factors. Which factors are not covered in Peters' analysis?

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Running head: CASH FLOW AND EARLY EXITS

Cash Flow and Early Exits
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CASH FLOW AND EARLY EXITS

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Cash Flow and Early Exits
Question 1
The use of a firm’s working capital in explaining the concept of cash flow can be termed
as misleading. Cash flow analysis within a business focuses on cash and its equivalents. It seeks
to understand how the cash comes into the business and is used. On the other hand, the working
capital aspect focuses on the current liabilities and current assets held by a particular firm. The
current assets, as well as liabilities, will contain the short term liabilities and assets. The assets
are used by the business to ensure they can meet their current obligations (within the current
accounting year). Working capital is obtaine...


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