Burn Rate Template

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Burn Rate Template

This burn rate template demonstrates how to calculate the gross and net burn rate of cash of a company that is earning negative profit.

Below is a screenshot of the burn rate template:

Burn Rate Template Screenshot

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Burn Rate refers to the rate at which a company depletes its cash pool in a loss-generating scenario. It is a common metric of performance and valuation for companies, including start-ups. A start-up is often unable to generate a positive net income in its early stages, as it is focused on growing its customer base and improving its product. As such, seed stage investors or venture capitalists often provide funding based on a company’s burn rate.

How to Calculate Burn Rate?

1. Gross Burn Rate

Gross Burn Rate is a company’s operating expenses. It is calculated by summing all operating expenses such as rent, salaries, and other overhead, and is often measured on a monthly basis. It also provides insight into a company’s cost drivers and efficiency regardless of revenue.

Gross Burn Rate = Cash / Monthly Operating Expenses

2. Net Burn Rate

Net Burn Rate is the rate at which a company is losing money. It is calculated by subtracting operating expenses from revenue. It is also usually measured on a monthly basis. It shows how much cash a company needs to continue operating for a period of time.

Net Burn Rate = Cash / Monthly Operating Profit

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Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.

 

Financial Analyst certification curriculum

 

A well rounded financial analyst possesses all of the above skills!

 

Additional Questions & Answers

CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.

In order to become a great financial analyst, here are some more questions and answers for you to discover:

 

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