Definition Cash Burn Rate. Description
The 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. Formula
The cash burn rate can be calculated in one of two ways:
- The first calculation method is based on the cash flow statement and takes the cash used for operations plus cash used for capital expenditures and purchases of ongoing businesses (net of cash received) and divides it by the number of months covered by the cash flow statement (i.e. 12 months for annual and 3 months for quarterly statements).
- The second calculation method is based on the income statement and divides the earnings before interest, taxes, depreciation and amortization (EBITDA) excluding non-recurring gains and losses by the number of months covered by the income statement.
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
|
In the forum section you will find recent discussions within this knowledge area.
|
|
|
In the best practices section you will find the best forum discussions within this knowledge area.
|
|
|
In the expert tips section you will find advices from experts within this knowledge area.
|
|
|
In the Resources section you will find powerpoint presentations, micro-learning videos, articles, news items, etc. within this knowledge area.
| |
News about Cash Burn Rate
|
|
|
|
| |
Videos about Cash Burn Rate
|
|
|
|
| |
Presentations about Cash Burn Rate
|
|
|
|
| |
Books about Cash Burn Rate
|
|
|
|
| |
More about Cash Burn Rate
|
|
|
|
|
|
|
|
|
Special Interest Group Leader
|
|
|
|
|
|
|
|
