ECONOMICS
ENTREPRENEURS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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cash rate
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burn rate
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cash flow rate
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liabilities
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Detailed explanation-1: -What Is Burn Rate? The burn rate represents the speed at which an unprofitable company consumes its cash reserves. In the case of a startup company, it is the rate at which a new company is spending its venture capital to finance overhead before generating positive cash flow from operations.
Detailed explanation-2: -What is the difference between run rate vs. burn rate? While run rate uses available data to estimate a company’s annual revenue, burn rate measures negative cash flow. It achieves this by calculating how a new company spends its venture capital on financing overhead before generating profits from operations.
Detailed explanation-3: -Net Burn, often referred to as Burn Rate, is the amount a company is losing per month as they burn through their cash reserves. It occurs when a company’s operating costs are higher than their revenue. A company that is profitable and generating cash has a “negative Net Burn".