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Cash burn

How fast an unprofitable company is spending its cash.

FundamentalsIntermediate

Definition

Burn rate is usually measured per month or quarter. Dividing cash on hand by the burn rate gives a rough runway, the time before the company needs more funding.

Formula

Runway (months) = cash / monthly cash burn

Watch out for

A short runway often leads to share offerings, which dilute owners, or to debt on worse terms.

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