What is Burn Rate?

Burn Rate is the rate at which a company is spending its cash reserves to fund its operations. Burn Rate is often used by investors and analysts to assess a company’s financial health and estimate its runway, or the amount of time the company has until it runs out of cash. A high Burn Rate may indicate that a company is spending too much too quickly and may run out of cash before it can become profitable. Sometimes profitability is not the goal and the company is more focused on achieving key milestones in order to support additional capital raise for further expansion.