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Financial Forecasting MCQs

Why is it reasonable for a startup company to forecast a Net Loss for several years?

A company can never make money in its first years.

It reduces tax liability in future years.

As the company launches and grows, expenses will often exceed any revenue-generating abilities; hence, the expected payoff will not come until future years.

It's not reasonable and should not be done.

Answer

Correct Answer: As the company launches and grows, expenses will often exceed any revenue-generating abilities; hence, the expected payoff will not come until future years.

Explanation:

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