Can a company have neg. cash flow and still be highly valued bit investors
belongs to book: FUNDAMENTALS OF FINANCIAL MANAGEMENT|Eugene F.Brigham, Joel F. Houston|12th Edition| Chapter number:3| Question number:7
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belongs to book: FUNDAMENTALS OF FINANCIAL MANAGEMENT|Eugene F.Brigham, Joel F. Houston|12th Edition| Chapter number:3| Question number:7
total answers (1)
Yes. Negative free cash flow is not necessarily bad. Most rapidly growing companies have negative free cash flows because the fixed assets and working capital needed to support rapid growth generally exceed cash flows from existing operations. This is not bad, provided the new investments will eventually be profitable and they contribute to free cash flow.
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