Since many start-up firms operate at a loss,a financial analyst may use cash flow as an alternative to earnings.

Question

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Since start-up firms may not have positive earnings in the initial years of operation, cash flow can be a more relevant measure of their financial performance. Cash flow represents the inflows and outflows of cash in a business and indicates the firm's ability to generate cash to support its operations and investments. Therefore, a financial analyst may rely on cash flow analysis to evaluate the financial health of start-up firms.

Since Many Start-Up Firms Operate at a Loss,a Financial Analyst