The Accountant-May-June 2017

Finance and Investment
will also need huge initial out flow in
terms of acquisition of essential assets.
It is usually a stage that requires proper
management and great discipline.
Growth stage
The growth stage comes immediately after
successfully navigating the challenges of
introduction stage. The business at this
stage has many return customers and its
cash flows are impressive. It is making
profits. Expansion is usually common
at this stage, opening new branches or
even introducing new lines of business.
The negative at this stage is competition
increase by the day. If the management
is able to innovate and ensure superior
customer experience then competition
will not be a major threat. However if they
are not able to wade off the competitors,
the cash flows are considerably reduced.
Maturity stage
Immediately after the growth stages, the
business enters the maturity level. Here
the business has almost constant level
of income. The cash flows are stable. The
management at this level will determine
whether the business will transit to the
decline stage or not. A wise business
person will create other income streams
to ensure if the original ones dry up, he or
she has a backup. On the other hand if the
management is not keen the businesses
will descend into the decline stage.
Decline stage
The last stage is usually the decline one.
If a business fails to diversify during the
growth and the maturity stages, it will
decline. Yet still if management does not
act with speed during the decline stage,
the eventual death of the business is
inevitable.
The long background provided brings
us to the essentials of financial discipline.
The management part, hence we talk
of financial management (personal or
corporate). The objective of financial
management; personal or corporate is
value addition or wealth creation. The
value or wealth created is for the benefit
of the owner (s). Value creation calls for
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