Good morning. It's Saturday, March. 09 and we're covering understanding the role of cash flow in business, what your startup's burn rate really means, 10 housing markets where home prices are falling, and much more. | First time reading? Sign up here. | Stock Market Update | | | | | Market Performance: March 08, 2024. | Stocks ended the week with a thud, closing down on Friday, as investors pulled back after February's job report and market powerhouse Nvidia (NVDA) had a rare off-day.
The S&P 500 (^GSPC) lost 0.7% after logging another record close on Thursday, while the Dow Jones Industrial Average (^DJI) shed 0.2%, with losses pared by a pop in Apple (AAPL) shares. The tech-heavy Nasdaq Composite (^IXIC) lost 1.2% after a sharp gain the previous day. Shares of Nvidia fell more than 5% after a record-breaking hot streak.
On the corporate front, Costco (COST) shares fell 7% after its quarterly sales miss overshadowed an earnings beat. Broadcom's (AVGO) revenue beat and forecast for $10 billion in sales of AI-linked chips failed to impress investors, sending the stock over 6% lower. |
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| | Financial Maverick Insights | | | | | What Is Cash Flow? Understanding the Role of Cash Flow in Business | Anyone with a personal checking account understands the challenge of keeping track of the money available to pay the bills. The point of watching a checkbook is to ensure the money coming in exceeds the money going out. The movement of money in and out of a checking account represents cash flow.
Businesses are like households in that respect. They must keep a close eye on their checkbook to maintain a positive cash flow, or to anticipate a possible negative cash balance by sourcing (or raising) money from other sources. Ahead, learn more about the different types of cash flow.
What is cash flow?
Cash flow is a record of both money received (cash inflow) and money paid (cash outflow) during a given time period. Effective cash flow management ensures there's more inflow than outflow.
What is a cash flow statement?
Your cash flow statement is a business financial statement that records the inflow and outflow of your business. It keeps a record of when cash was received and when cash was spent, covering operating activities, investing activities, and financing activities.
What is cash flow management?
Cash flow management is when a business monitors, analyzes, and optimizes its inflow and outflow of cash. This involves ensuring it has sufficient funds available to meet financial obligations, such as paying bills, salaries, and loan repayments, at all times.
Cash flow from investing
This tracks money spent or received to buy or sell assets used in the business, such as property and equipment. It also includes money spent to buy stocks, bonds, or other securities, and money received from selling securities. |
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| | | | | | Understanding What Your Startup's Burn Rate Really Means | Understanding burn rate: the basics
For the founder who has little more than an idea and some free hours to pursue it, burn rate is unknowable, says Tim Lipton, who has provided CFO services for more than 100 startups. With no financial assets, the only burn rate that matters is the founder's rough estimate of how long and how much it will cost to develop a product.
"Of course you can't know, but you've got to get out there and start making mistakes until you have a better feel for what it will take to hit key product milestones," he says.
But it's never too early to think about a key question that will inform your ultimate cash burn analysis: What type of company do you hope to build? If you are targeting a massive consumer market and won't be happy with anything other than an IPO, for example, you'll need to make hefty investments to attract top talent from other successful companies and establish a widely recognized brand. If you are building a gaming app or a cloud service for a niche business market and hope to get acquired within a few years, your need for capital will be lower.
The two burn rate metrics that matter: unit economics and cost of growth
Frugality alone won't be enough as your business gains traction and you look to raise money from professional investors. At this stage, you need to get serious about the two main variables that will determine your burn rate: unit economics and the cost of growth, says Kasznik. Unit economics is the amount your company earns on every item your company sells, whether it's a hardware product, an app or a cloud service. You calculate it by subtracting the cost to acquire each new customer from the lifetime value of that customer. |
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| Real Estate News |  | Looking for a deal? Check out the 10 housing markets where home prices are falling the most | With mortgage rates still quite high, aspiring American homebuyers are desperate to find places they can afford to buy homes. |
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|  | Defining the Path to Success | RE/MAX Co-Founder Dave Liniger. Photography by Michael Weschler. Bold. Wise. Wildly successful—all apt ways to describe real estate icon Dave |
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|  | Cash is no longer king. So why are we still printing so much? | A Fed study showed that most payments are handled through debit or credit cards. However, experts say that cash is still a crucial payment method. |
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| | Alternative Investing |  | Best AI Crypto Tokens to Invest in for the 2024 Bull Run | Artificial intelligence is the biggest narrative of 2024, both in the crypto space and in the mainstream technology space. |
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|  | The 5 best small cap AI companies to buy now | Artificial intelligence stocks are all the rage. Investors are constantly searching for the next big winner in artificial intelligence. |
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