Cash Burn Rate

Cash Burn Rate quantifies the amount of cash a company depletes over a specific time period — typically measured monthly. It’s a critical metric for assessing a startup's financial runway and funding requirements.

Formula:

Burn Rate = (Opening Cash Balance – Closing Cash Balance) / Number of Months

Importance:

  • Determines the runway, or the time remaining before cash reserves run out.

  • Helps founders and financial teams make decisions about cost-cutting, fundraising, or scaling.

  • Investors use burn rates to evaluate financial health and risk.

Example:

If a company starts a quarter with AED 60,000 and ends with AED 30,000 after three months, its monthly burn rate is AED 10,000.