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The burn rate is generally how fast you burn through cash in the race to become profitable or before you need a new round of funding from bank loans, venture capitalists, or angel investors.
Burn Rate = Current Assets/Average daily operating costs
The rate at which a new company uses up its venture capital to finance overhead before generating positive cash flow from operations. In other words, it's a measure of negative cash flow.
Burn rate is usually quoted in terms of cash spent per month. For example, a burn rate of1 million would mean the company is spending1 million per month. When the burn rate begins to exceed forecasts, or revenue fails to meet expectations, the usual recourse is to reduce the burn rate (which, in most companies, means reducing staff).
it is a measure of negative cash flow..when a company is start up they used their capital to raise their positive cash flow..burn rate is usually quoted in terms of cash spent per month. analysis of cash consumption tells investors whether a company is self sustaining and need for future financing..burn rate are important also for mature companies that are struggling and burdened with excessive debt...burn rate can be calculated as
BURN RATE = Current assets /Average daily operations.
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