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re: Excess Cash on Hand - Businesses
Posted on 3/11/15 at 3:14 pm to TheDirty1
Posted on 3/11/15 at 3:14 pm to TheDirty1
I measure financial condition relative to both the balance sheet and the income statement.
My non-expert opinion....
Cash Burn Rate = (Cash / Operating Expenses + Debt Service) x 365
At a minimum, it should be equal to the greater of 90 days or 3 x your average cash conversion cycle days.
Generally speaking, anything less represents liquidity risk, and anything more represents capital planning issues.
My non-expert opinion....
Cash Burn Rate = (Cash / Operating Expenses + Debt Service) x 365
At a minimum, it should be equal to the greater of 90 days or 3 x your average cash conversion cycle days.
Generally speaking, anything less represents liquidity risk, and anything more represents capital planning issues.
This post was edited on 3/11/15 at 3:15 pm
1
Posted on 3/16/15 at 3:12 pm to Hand
Burn rate is definitely a relevant calculation for startups in the i curve. I was thinking about more developed companies in my response. Very good reply.
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