What is monthly burn rate?

What is monthly burn rate?

• A. Net cash spent per month
• B. Total cash on hand
• C. Net income per month
• D. Monthly revenue

Answer: (D)

Monthly burn rate is the rate at which a company is consuming its cash each month. It focuses on cash outflows relative to inflows, i.e., how much cash the business spends net of what it brings in during the month. The best answer is net cash spent per month because it captures the actual cash the company is using monthly, which directly affects how long funds last. It isn’t the total cash on hand (a static balance), nor net income (which is accounting profit that can include non-cash items), nor monthly revenue (which is cash inflow from sales and doesn’t reflect spending). For example, if you spend 50k in a month and only bring in 10k, your net burn is 40k—that’s the cash being used up that month. If you have 200k in cash, that would give about 5 months of runway at that burn rate.

Monthly burn rate is the rate at which a company is consuming its cash each month. It focuses on cash outflows relative to inflows, i.e., how much cash the business spends net of what it brings in during the month. The best answer is net cash spent per month because it captures the actual cash the company is using monthly, which directly affects how long funds last. It isn’t the total cash on hand (a static balance), nor net income (which is accounting profit that can include non-cash items), nor monthly revenue (which is cash inflow from sales and doesn’t reflect spending). For example, if you spend 50k in a month and only bring in 10k, your net burn is 40k—that’s the cash being used up that month. If you have 200k in cash, that would give about 5 months of runway at that burn rate.