Burn rate
Burn rate is the speed at which a company spends shareholder capital, depleting its cash reserves.
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Expanded Definition
Burn rate measures the expenditures of a company or individual. Investors want this number to be smaller than the sales of the company.
e.g. if Manny's Used Cars is spending 100k per month (that's his burn rate) on employees, utilities,taxes and merchandise repurchases, he will want to do more than 100k in sales per month so he doesn't run a negative cash flow.
Struggling companies often focus on reducing their burn rate (expenses) in order to return to positive cash flow. Typically staffing is the first victim in reducing burn rate. In more extreme cases cutting inventory or utility usage can be used, but both methods usually end up driving away more sales as well.
For investors burn rate is especially important to note in speculative startup companies like biotech stocks, where it may be several years before they generate any sales.
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