Cash Burn Rate: Runway, Benchmarks & How to Stretch
Warren Team
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Key terms
- Burn RateThe rate at which a company spends its cash reserves, typically measured on a monthly basis, before it begins generating positive cash flow from operations. Burn rate is a critical metric for startups and early-stage companies that are investing heavily in growth before reaching profitability. Understanding your burn rate is essential for determining how long your company can survive on its current funding, which directly informs your runway.
- BenchmarkA standard index or portfolio used to measure investment performance. Common benchmarks include the S&P 500 for large-cap stocks and the Bloomberg Aggregate Bond Index for bonds.
- Annual Percentage Rate (APR)The yearly cost of borrowing money, including interest and fees, expressed as a percentage. APR provides a complete picture of loan costs beyond just the interest rate.
- Cash FlowThe net amount of cash moving in and out of your accounts. Positive cash flow means you're earning more than you're spending, while negative cash flow indicates you're spending more than you earn.
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