Cash Burn

Cash burn refers to the rate at which a company spends its available cash reserves to cover operating expenses before generating positive cash flow from operations. It’s particularly relevant for startups and early-stage companies that are not yet profitable but rely on external funding to finance their operations.

Types:

• Gross Cash Burn: The total cash a company spends in a specific period, typically monthly.

• Net Cash Burn: The difference between cash outflows and inflows in a given period.

Why It Matters:

• Indicates how long a company can operate before needing additional funding.

• Helps founders and investors assess operational efficiency.

• Provides insights into whether current spending aligns with business milestones.