Growth firms have the ability to scale up their business very rapidly. One consequence of this rapid growth is that the firm’s balance sheet may come under significant pressure as capital demands escalate in line with business growth. While growth firms in the early stages may not be profitable, investors are generally willing to take a longer-term view in the expectation that rapid revenue growth will eventually translate into increasing profits and cash flow.
Growth firms can be found in any sector, but they tend to be clustered in areas such as technology and life sciences. As some of the biggest and most successful companies such as Apple and Google demonstrated in the past, size is also no barrier to being a growth firm.
Investment dictionary. Academic. 2012.
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