Gross burn rate

The total cash a company spends in a period, usually a month, before counting any cash received from customers.

Example

A company spending 350,000 a month has a gross burn of 350,000.

Important

Net burn subtracts customer cash; runway is normally calculated on net burn.

Related terms

  • Net Burn Rate — The amount by which a company's cash falls each month, equal to cash spent minus cash received.
  • Cash Runway — The number of months a company can operate before running out of cash, calculated as cash divided by monthly net burn.

Lessons that explain it

  • Runway is cash in the bank divided by what really leaves each month — Diligence recalculates burn and runway from bank statements rather than from management's summary, separating gross burn from net burn and cash held from cash promised. (10 min)

All 578 terms in the Investing glossary