burn rate


Definition of burn rate

: the rate at which someone or something (such as a corporation) uses up available funds
  • We had incorporation documents, employment contracts, nondisclosure agreements, and a stock-option plan. Since only one guy was drawing a salary, I thought I could manage our burn rate for a while, but I was feeling a growing sense of urgency.
  • —Charles H. FergusonFast CompanyOctober 1999
  • The company has $89 million in cash and short-term investments as of January, giving it many years of a cushion even at its annual cash burn rate.
  • —Matt KrantzUSA Today18 Mar. 2013

There's more!

Love words? You must — there are over 200,000 words in our free online dictionary, but you are looking for one that’s only in the Merriam-Webster Unabridged Dictionary.

Start your free trial today and get unlimited access to America's largest dictionary, with:

  • More than 250,000 words that aren't in our free dictionary
  • Expanded definitions, etymologies, and usage notes
  • Advanced search features
  • Ad free!
Already a subscriber? Log in.

First Known Use of burn rate


in the meaning defined above

See Words from the same year
NEW! Time Traveler

Financial Definition of BURN RATE

burn rate

What It Is

Burn rate is the amount of time it will take a company to exhaust its capital cushion.

How It Works

Burn rate is usually expressed in terms of cash burned per month, but can be expressed according to any time period the analyst finds useful.

Let's assume newly formed Biotech Company ABC has just been granted venture capital (VC) funds to pursue a groundbreaking new drug. The VC firm gives ABC a certain number of years to reach breakeven or even become profitable.

If Biotech Company ABC is spending $100,000 per month beyond what they are bringing in, they have a burn rate of $100,000 per month or $1.2 million ($100,000 x 12 months) per year. The VC firm knows that it will need to provide enough cash to cover that shortfall each period.

Once a company has burned through all of its cash, it will need additional funding from venture capitalists, lenders or an initial public offering if it wants to continue operations.

Why It Matters

Investors look at the burn rate versus expected future revenues of a company to decide if it's worthwhile to invest in the firm. If the company's burn rate exceeds forecasts or if its revenues are not growing at a reasonable pace, it may be too risky to invest in the company. A company may reduce its burn rate by becoming more operationally efficient.

Seen and Heard

What made you want to look up burn rate? Please tell us where you read or heard it (including the quote, if possible).

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!


one who attends or assists a leader

Get Word of the Day daily email!

Test Your Vocabulary

Test Your Emoji Exceptionalism

  • test-your-emoji-exceptionalism-written-with-a-lot-of-emoji
  • What is this emoji intended to represent: 🤳
How Strong Is Your Vocabulary?

Test your vocabulary with our 10-question quiz!

Syn City

Test Your Knowledge - and learn some interesting things along the way.


Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!