1. What is Net Burn?

Net Burn refers to the rate at which a company is using up its cash reserves over a specific period, typically on a monthly or quarterly basis. It represents the difference between cash inflows and outflows.

2. How Does the Calculator Work?

The calculator uses the Net Burn formula:

Where:

• \( \text{TMC} \) — Total Monthly Cash Sales ($)
• \( \text{TMCE} \) — Total Monthly Cash Expenses ($)

Explanation: A positive result indicates net cash gain, while a negative result indicates net cash burn.

3. Importance of Net Burn Calculation

Details: Monitoring net burn is crucial for cash flow management, financial planning, and determining how long a company can operate before needing additional funding.

4. Using the Calculator

Tips: Enter total monthly cash sales and total monthly cash expenses in dollars. Both values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between gross burn and net burn?
A: Gross burn refers to total cash expenses only, while net burn accounts for both cash inflows and outflows.

Q2: What does a negative net burn indicate?
A: A negative net burn means the company is spending more cash than it's generating, indicating cash depletion.

Q3: How often should net burn be calculated?
A: Net burn should be calculated monthly for accurate cash flow monitoring and financial planning.

Q4: What factors can affect net burn rate?
A: Revenue fluctuations, expense changes, seasonality, and business growth initiatives can all impact net burn.

Q5: How can companies reduce their net burn?
A: Companies can reduce net burn by increasing revenue, decreasing expenses, or a combination of both strategies.