Question

When a company has 2.6 years of burn rate left. Is it considered a bad company?...

When a company has 2.6 years of burn rate left. Is it considered a bad company? Why?

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Answer #1

Answer-

The burn rate of 2.6 years is the median effective remaining life where the companies solicit shareholders for fresh reserves before the existing supply of available shares starts to decrease.

When the company has 2.6 years of burn rate left it is considered as a company which is running out of cash and it will have to raise capital to sustain in the future through shareholders and increase the reserves of the company.
The company can be considered bad company as the chances of revival are difficult as the company may find difficult to convince the shareholders to raise money.

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