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what is "burn rate"?
glossary FAQ: glossary.
D. Glenn from Cork, Ireland
11 May, 2009
The rate at which a new company uses up its venture capital to finance overhead before generating positive cash flow from operations. In other words, it's a measure of negative cash flow.
Burn rate is usually quoted in terms of cash spent per month. For example, a burn rate of 1 million would mean the company is spending 1 million per month. When the burn rate begins to exceed forecasts, or revenue fails to meet expectations, the usual recourse is to reduce the burn rate (which, in most companies, means reducing staff). Visit FXDD
please tell me what "deficit spending" is
glossary FAQ: glossary.
M. Nolan from Oshawa, Canada
03 June, 2009
a "deficit spending " is When a government's expenditures exceed its revenues, causing or deepening a deficit. This excess spending needs to be financed through borrowing, likely from foreign governments. The increased government spending can help stimulate the economy as more money flows in, but the jump in borrowing can have an adverse effect by raising interest rates.
John Maynard Keynes was an advocate of deficit spending as a fiscal policy tool to help stimulate an economy in recession. During a recession, increased government spending can stimulate business activity, create jobs and spur consumer spending. This creates a multiplier effect in which $1 of government spending helps increase GDP by more than $1. Some complain that the negative effect of deficit spending is that interest rates will increase as the government borrows more. The higher rates make borrowing money more expensive and can stifle growth. Visit MB Trading