Price to Cash Net of Burn

The Cash Burn Rate is the amount of negative Cash Flow for a given year and company.

If a company is generating positive free cash flow, the cash burn will be zero.

This ratio helps to identify companies that may have a lot of Cash relative to their price, but where the company is spending the Cash quickly.

Companies that are generating negative Cash Flow should be valued, relative to Cash, at a lower multiple as compared to Companies that are generating positive Cash Flow.

This is because the Cash value seen in financial statements is always historical, and may well be lower today than it was at the balance sheet date.

As with all of our Balance Sheet Ratios, this will be based on the latest financial statements (interim or annual) but its always important to be aware of any post-balance sheet events that may have reduced the cash balance - an acquisition or a buyback, for example.

The market may be pricing in something that has not been captured by the snapshot given in the latest financial statements.

This is measured on a TTM basis.