Q: This question refers to the spreadsheet that we used in our lectures to analyze a New Product Venture. This spreadsheet is titled MODULE 4 – NEW PRODUCT VENTURE – BASE CASE.xls
In our New Product Venture’s forecasted financial statements, why is Cash Flow larger than Net Income in Year 6?
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Q: This query relates to the spreadsheet we utilized to examine a new product venture within our lectures. The name of this file is MODULE 4-NEW PRODUCT VENTURE-BASE CASE.xls.
Why does cash flow in Year 6 exceed net income in our New Product Venture’s projected financial statements?
- Because they’ve collected some of the cash that had been invested in Working Capital
- Because Depreciation is not a Cash Flow
- Because they have to pay taxes
- Cash Flow is always larger than Net Income
Explanation: A reduction in working capital (such as decreased inventory or accounts receivable) increases cash flow, even though it doesn’t affect net income. Depreciation is not a cash flow, but it doesn’t explain why cash flow is larger than net income specifically in Year 6. Cash flow is not always larger than net income; it varies depending on the financial activities in each year.
