ECONOMICS
ENTREPRENEURS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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number of months before cash runs out
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the number of days you can stay in business
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number of days before a bill comes due
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none of these options
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Detailed explanation-1: -To figure out your cash runway (how long the company has until it runs out of cash), take the rest of the money left in the cash reserves and divide it by the burn rate. For example, if there is $200, 000 left and the burn rate is $50, 000 per month, it will take 4 months for the company to run out of cash.
Detailed explanation-2: -What is a good burn rate? The general recommendation is for a startup business to have six to 12 months of expenses on hand. 2 If the company has $100, 000 in the bank, a good burn rate would fall between $16, 667 (six months) and $8, 333 (12 months).
Detailed explanation-3: -It is calculated by subtracting its operating expenses from its revenue. It is also measured on a monthly basis. It shows how much cash a company needs to continue operating for a period of time.
Detailed explanation-4: -"Burn rate” refers to the rate at which a company spends its supply of cash over time. It’s the rate of negative cash flow, usually quoted as a monthly rate.
Detailed explanation-5: -Gross Burn = Total Monthly Cash Expenses. Net Burn = Total Monthly Cash Sales – Total Monthly Cash Expenses. Implied Runway = Cash Balance ÷ Burn Rate.