Burn Rate - This term is used to describe how much cash a company is burning through each month. It is important for investors, shareholders and lenders to know since it shows how long the company is likely to survive before it must become profitable.  In the event it does not become profitable before it runs out of cash, then the burn rate is an indicator of how many months the company has left before it either runs out of capital or must raise additional financing to survive.

 If a company has gross revenue of $1,000,000 per month, but its cost of goods, selling general and administrative expenses are $750,000 per month, then it would be viewed as having a burn rate of $250,000 per month. If that same company has $2,000,000 in cash in the bank, then it would have eight (8) months to achieve profitability, cut costs or obtain additional financing to continue its operations.