Burn rate

From Wikipedia, the free encyclopedia

Burn rate is a synonymous term for negative cash flow. It is a measure for how fast a company will use up its shareholder capital. If the shareholder capital is exhausted, the company will either have to find additional funding or close down.

The term came into common use during the dot-com era when many start-up companies went through several stages of funding before emerging into profitability and positive cash flows and hence becoming self-sustainable (or, as for the majority, failing to find additional funding and sustainable business models and hence going bankrupt). In between funding events, burn rate becomes an important management measure, since it together with the available funds provides a time measure to when the next funding event needs to take place.

Some claim, that part of the reasons behind the dot-com bust, was the unsound management and financial investor practices to keep the burn rate up, taking it as a proxy for how fast the start-up company was acquiring a customer base.

Aside from financing, the term burn rate is also used for projects to determine the rate at which hours (allocated to a project) are being used, to identify when work is going out of scope, or when efficiencies are being lost.

Chemistry

Burn rate is a measure of the linear combustion rate of a compound or substace such as a candle, a propellant, or a substance. The industry recognized nomenclatures are mm/s or in/s for millimeters per second or inches per second respectively. Burn rate (or burning rate) applies to a substance and how that substance reacts to combustion. It can be measured at ambient pressure (ie at sea level) or at a modified pressure either in a vacuum chamber or in a pressure chamber or in a device (article containing a substance) to determine the burn rate of the substance in a variety of conditions. Burning rate typically varies (upward) with pressure and temperature. Some substances have an inverse relationship of burning rate to pressure, while others (such as black powder in particular) have a nearly neutral burning rate versus pressure. A substance is characterized in terms of burn rate by a burning rate vs pressure chart and a burning rate at each of several pressures vs temperature chart. One apparatus for measuring burning rate is a V shaped metal channel about 1-2 feet long wherein a sample is placed, with a cross-sectional dimension of approximately 6mm or 1/4". The sample is ignited on one end and time is measured until the flame front gets to the other end. The length of the sample as recorded is divided by the time it takes for the sample to burn from one end to another. The resulting figure is the burning rate and it is typically converted to or calculated as mm/s or in/s.

Chemistry / Regulation / Characterization

If a sample burns (or otherwise reacts such as by shock wave) at a rate in excess of Mach 1 or 1138 feet per second it is said to "detonate". If it burns on the order of meters per second it is said to "deflagrate". Wiki item "explosives" states in part, "Low explosives undergo deflagration at rates that vary from a few centimeters per second to approximately 400 metres per second." In any case if a sample burns under "a few centimeters per second" it is generally understood that the sample neither detonates or deflagrates, but rather burns or smolders. Between the range of 0.01mm/s and 100mm/s most scientists agree the sample is burning not deflagrating on the basis that deflagrating uses the term "decomposes rapidly" (that is to say by one legal definition by USA regulator CPSC, substantially all of it in under 0.05 seconds) to characterize it, but regulators disagree, primarily as a means to "grab jurisdiction" and to "improve fines and convictions", which it successfully does. Chemistry art has come under increasing scrutiny on the part of regulators and enforcers worldwide despite its uncommon (percapita) misuse and deaths especially as compared to automobiles or alcohol or construction tools.