A performance evaluation of an entity in the growing life cycle by means of income and cash flows
An entity passes through four stages of life cycles during its lifespan. These life cycle stages reflect a set of financial characteristics that lead to different information on income and cash flows, which are also supplied by the cash flow statement. Therefore, combining the life cycle theory with an analysis of the cash flow statement may be useful as a performance measure and an indication of how entities are managing the flow of their funds. This paper evaluates an entity in the food and beverage sector by means of income and cash flow during the growth cycle. Steps are followed for analysing income and cash flows and for comparing the application thereof to a benchmark in the growth phase of an entity's life cycle. In theory an entity will have typical income and cash flow patterns during each life cycle stage.