RE:3 months financials Hangman, just for you,
Money for nothing: How firms have financed R&D-projects.
R&D is characterised by a long, multi-stage time lag between cash outlays and cash flowing in (Holmstrom, 1989). This lag can be divided into the lags between the start of research and a proven invention, the proven invention and a working prototype, the first prototype and one that can be easily manufactured, the final prototype and start of production, the start of production and commencement of sales, commencement of sales and revenues coming in, and, finally, incoming revenues and profits. At each point a decision is made whether to continue, and successively more cash is needed. The exact length of these nested lags cannot be predicted in advance, and the external and internal/opportunity costs of cash may vary over these lags.
Obviously, the time lag is not fully controllable. Scherer (1967) and Kamien and Schwartz (1982, p. 132) note diminishing returns to the time compression of R&D. The more time is reduced, the higher the costs, as one cannot await the outcomes of previous experiments before proceeding with new ones. At the Edison lab in the late nineteenth century, for example, the time scale of experimentation was enormous. To make carbon filament 6000 different plant species were tried and for the nickel-iron battery 50,000 separate experiments were performed.
A company can project an increase in growth that improves its economies of scale. This allows it to cover its fixed expenses, such as overhead and R&D, to improve its financial situation. For example, many food delivery start-ups are in a loss-generating scenario. However, forecasts in growth and economies of scale encourage investors to further fund these companies in hopes of achieving future profitability.
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The takeaway here,
It takes going into considerable debt and a long time horizon to bring a concept to fruition.
WOW, its like Zen man, are you enlightened?