The rate at which a company depletes its cash reserves to cover operating expenses before it generates positive cash flow or profitability.
Cash burn refers to the rate at which a business consumes its available cash to cover operating expenses and financial obligations. It represents the net negative cash flow, indicating the amount of cash a business uses over a specific period. Monitoring cash burn is crucial for small business owners as it helps them assess their financial sustainability and plan for future funding needs. By understanding and managing cash burn effectively, businesses can make informed decisions to optimize cash flow, control expenses, and ensure long-term viability.