You Decide: Ignoring all other factors, will a company that is generating negative cash flows from operating activities be a good or bad investment?

When evaluating a company, you notice the following on its cash flow statement: negative cash flow from operating activities, negative cash from investing activities, and positive cash flow from financing activities. A fellow student commented, “I wouldn’t invest in a company that cannot generate cash from its core business activities!” However, in 1985, Home Depot had a very large negative cash flow from operating activities and later turned into a very large, successful company. How would you answer your friend?