Why is a company's cash burn rate significant for its survival? A) It represents the speed...

Why is a company's cash burn rate significant for its survival?

A) It represents the speed with which the company is using up cash and how soon it will run out of cash in an adverse economic environment.

B) It is a signal of the ability of a startup company to raise cash from venture capitalists.

C) It indicates how quickly the company will run out of cash before it can pay all its debt obligations.

D) It measures the rate at which a company is investing in new products and how quickly it will generate additional revenue.

Solutions

Expert Solution

In a loss generating scenario, company depletes its cash pool.

The rate at which the above scenario occurs is called cash burn rate.

Therefore,

Cash burn rate represents the speed with which the company is using up cash and how soon it will run out if cash in adverse economic environment is the correct answer.

Option A is the correct answer.

ekkarill92 answered 2 years ago

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