burn-rate

Vocabulary Word

Definition

'Burn-rate' measures how fast a company uses its cash reserves, especially startups. Think of it like the speed of a car burning through fuel. If it's too fast, the car (company) may run out of fuel (money) before reaching its destination.

Examples in Different Contexts

Venture capitalists often assess a startup's burn-rate to determine the company's financial health and its need for future funding rounds. A CFO might note, 'Given our current burn-rate, we have a runway of 10 months before additional capital is required.'

Practice Scenarios

Startup

Scenario:

Our cash runway is shrinking. We might need to consider new ways to boost revenue or reduce operational costs.

Response:

We might need to negotiate with our suppliers or opt for less expensive materials to manage our burn-rate better.

Business

Scenario:

The company's financial health may be at risk with such a high expenditure rate. Their current revenue stream doesn't seem sustainable in the long run.

Response:

If we can reduce administrative costs and overheads, it might help bring our burn-rate to a more sustainable level.