Final answer:
Net working capital might remain constant or decrease during the mature stage of a product cycle due to increased efficiencies and better forecasting, but it could also fluctuate unpredictably due to variables like market dynamics and management decisions.
Step-by-step explanation:
When considering the effect of a mature product cycle on net working capital, it is generally expected that net working capital would remain constant or possibly decrease, depending on the industry and specific business practices. As a product reaches maturity, the company's operations surrounding that product tend to become more streamlined and efficient. At this stage, companies usually experience a reduction in production and inventory costs due to economies of scale and better forecasting. Moreover, they might negotiate better terms with suppliers, leading to a reduction in the cash conversion cycle.
However, this is not absolute and could vary widely based on the business model, market dynamics, and management decisions. Therefore, the correct answer could also be that it fluctuates unpredictably, given that real-world scenarios can deviate significantly from typical patterns due to unforeseen factors such as shifts in consumer preferences, increased competition, or supply chain disruptions.
It's important to consider these variables when making financial decisions based on the product life cycle stage. Managers should closely monitor changes in working capital requirements and adapt strategies accordingly to maintain operational efficiency and financial stability.