- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 20. Understanding Cash Flow Statements
- Subject 3. Cash Flow Statement Analysis
CFA Practice Question
Negative cash flows from operations and high "cash burn rates" are two factors that may have contributed to the decline in Internet stock values in 2001 (the dot-com bubble). True or False?
Correct Answer: True
Many Internet stock values had increased significantly based on future expectations rather than past performance. Many of these companies were spending cash at a much faster rate than they were generating cash through sales.
User Contributed Comments 3
| User | Comment |
|---|---|
| myanmar | good point |
| Bibhu | Burn rate is usually quoted as cash spent per month. A burn rate of 1 million could imply compnay spending 1 million per month. |
| ldfrench | Pets.com for example |