For startups, AOI goes beyond traditional operating income by removing the noise of irregular expenses or gains that don’t reflect day-to-day business operations. Allowable adjustments might include costs such as one-time product launch expenses, non-recurring R&D expenditures during a pivotal innovation phase, or extraordinary legal fees for patent filings. Additionally, startups may adjust for relocation expenses incurred during a strategic office move, one-off restructuring costs associated with pivoting the business model, stock-based compensation, or significant fundraising expenses that are not expected to repeat in future periods. By excluding these unusual items, AOI offers investors and management a more accurate look at the startup’s adjusted current earnings, which is vital for assessing long-term growth potential and operational efficiency.
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