What is my gross monthly cash burn rate?

Cash Burn Rate

Liquidity Measures

Liquidity is a means of understanding a company’s susceptibility to either current of future financial distress. It also helps build a risk profile of the business. But remember though that a single “safe” liquidity measure does not exist across all industries. Likewise, some industries traditionally and successfully trade at low liquidity levels, whereas for others, the same figure is a sign of distress. One indicator of liquidity is understanding your the amount of cash that your company has as its disposal should all revenue sources dry up. But what is my cash burn rate?

Cash Burn Rate (Gross)

Cash Burn rate

How do you get your gross burn rate? Your burn rate is the amount of cash your business “burns” through on average each and every month. The rate is an average of each month’s rate over the past 12 months

What does it mean?

This measure tells you your average monthly outgoings spend and used in part for your cash runway calculations. It is important to understand an average amount of outgoings each and every month

Check your gross cash burn rate with Jazoodle now.

How do we derive your cash runway?

Definition used:

Your company’s cash burn rate is calculated by the following:

total expenses and outgoings in each of the past 12 months

divided by 12

How Can I Improve my cash burn rate?

Your gross burn rate can be improved by a number of measures or changes, including:

  • Reduce your expenses and overheads
  • Implement strong supplier payables policies – stick to their payment terms
  • Emphasis on operational expenses v cosmetic or non revenue sustaining expenses

Video: Cash Runway

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