By
Borsgade
As part of his work for Morgan Stanley, Michael Mauboussin has just published quite a comprehensive analysis of the life cycle of companies.
Here, the focus is on defining the different periods a company goes through from formation to liquidation and what characteristics each period has.
The article is relatively technical, but the basic ideas and model are very useful for anyone who analyzes and invests in companies.
Understanding where a company is in its life cycle is helpful for assessing capital allocation, the cost of financing, corporate governance, and valuation. In this report, we build on a framework for establishing stages within the life cycle and describe how to use the statement of cash flows to place companies in the appropriate stage.
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