Final answer:
The statement that a company's cash flow cycle represents the time taken to convert working capital assets into cash is true. This cycle includes purchasing inventory, selling products, and collecting receivables. Reinvesting profits into the business can further enhance growth if done effectively.
Step-by-step explanation:
A company’s cash flow cycle could best be described as the process whereby the company turns working capital assets into cash. This statement is True. The cash flow cycle includes various stages such as purchasing inventory, selling products, and collecting receivables. Essentially, it traces the flow of funds from the point where the company pays out cash for its working capital, to the point where it collects cash from its customers.
Reinvesting involves using a portion of the company's profits to improve or expand its operations. This can include investing in new factories, hiring more labor, or acquiring technology. The cash flow generated can be reinvested in producing more goods or services, potentially increasing sales and, accordingly, cash flow in subsequent sales periods. For a company to grow sustainably, the reinvested cash flow must exceed the depreciation on the assets.