Plain definition
Net burn rate is the net reduction in cash during a period under a stated operating definition: recurring cash outflows minus recurring cash inflows. It is not EBITDA and it is not automatically the total movement in bank cash, because investing, financing, and one-off movements may sit outside the definition.
Illustrative example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
Suppose recurring operating cash outflows are and recurring operating inflows are in a month. Net burn is . During that same month, the company receives equity funding. Bank cash rises, but the operating model still burns .
| Recurring operating outflows | |
|---|---|
| Recurring operating inflows | |
| Net burn |
Why it matters
This prevents external funding from being mistaken for an improvement in the recurring business. The decision is whether the company can reduce the operating deficit or whether it needs a defined amount of funding until it does.
Practical consequence
Use the same inclusions each month and show a bridge from net burn to total cash movement. List separately equity, borrowing, asset sales, capital expenditure, and one-off payments. If the operating deficit changes, identify whether collections, pricing, volume, or recurring costs caused it.
Try your own numbers
Estimate how long unrestricted cash stays above the reserve at the current operating burn.
Cash runway