Jerry owns an ice cream parlor. His starting balance last month was $1,900. His ending balance was $2,200. What is Jerry's burn rate?

Jerry owns an ice cream parlor. His starting balance last month was $1,900. His ending balance was $2,200. What is Jerry's burn rate?

• A. -$300
• B. $300
• C. -$4,100
• D. $4,100

Answer: (A)

Burn rate shows how much cash is used over a period, based on the change in cash from start to end. Here the balance rose from 1,900 to 2,200, a change of 2,200 − 1,900 = 300. Since cash wasn’t spent but increased, the burn rate is the negative of that change, which is −$300. This means the business didn’t burn through cash; it actually gained cash. The other options would either imply spending more cash than was available or unrealistically large changes that don’t match the given balances.

Burn rate shows how much cash is used over a period, based on the change in cash from start to end. Here the balance rose from 1,900 to 2,200, a change of 2,200 − 1,900 = 300. Since cash wasn’t spent but increased, the burn rate is the negative of that change, which is −$300. This means the business didn’t burn through cash; it actually gained cash. The other options would either imply spending more cash than was available or unrealistically large changes that don’t match the given balances.