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Cash Burn RateKnowledge Center |
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Description of Cash Burn Rate. Explanation. |
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![]() Definition Cash Burn Rate. DescriptionThe Cash Burn Rate became a popular metric during the dot-com era to assess how quickly start-up or Internet companies are using up their cash reserves. Calculation of Cash Burn Rate. FormulaThe cash burn rate can be calculated in one of two ways:
The related measure of "Months to Burnout" can provide an estimate of how much longer a company can survive without a capital increase (via debt or equity financing) and is calculated as follows: Months to Burnout = (Cash + Cash Equivalents + Short-term Marketable Securities) / Cash Burn Rate. Compare also: Twelve Principles of the Network Economy
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