ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What is Burn Rate? Burn Rate refers to the rate at which a company depletes its cash pool in a loss-generating scenario. It is a common metric of performance and valuation for companies, including start-ups.

Detailed explanation-2: -The burn rate is the pace at which a new company not yet generating profits consumes its cash reserves. The burn rate is typically calculated in terms of the amount of cash that the company is spending per month.

Detailed explanation-3: -A most basic analysis of the net burn rate tells you whether your business is self-sustaining or not. If the net burn rate is positive, then you’re spending more money than you’re taking in, and something needs to change. You either need to cut costs or increase revenue.

Detailed explanation-4: -A burn rate is essentially the rate in which a startup or company uses its cash, and indicates how a company is spending its funding to finance overheads before generating revenues from their operations. Think of cash burn like the hourglass that measures how long your company has before it runs out of money.

Detailed explanation-5: -If you’ve heard the phrase “burning cash, ” then you likely already understand what burn rate means. If your company is burning cash, then you are spending more money than you are taking in. Similarly, your company’s burn rate is how much money your business is spending per month (revenue-expenses).