What Does A High Burn Rate Suggests?

What Does A High Burn Rate Suggests?

1 Answer

  1. Hi Janny, a high burn rate is no good for any company especially for startups. By the formula of burn rate which is the rate at which a company spends its supply of cash over time, implies that company is spending a lot of cash within a smaller period of time. A startup which already has less funding, this looks like no good news.
    So more technically speaking it means that by a high burn rate, a company is depleting its cash supply at a faster rate. It indicates that is it at a higher likelihood of entering a state of financial distress. This may suggest that investors will need to more aggressively set deadlines to realize revenue, given a set amount of funding. Alternatively, it might mean that investors would be required to inject more cash into a company for it to realize revenue.

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