Cash Flow and Burn Rate


Google search Snap, Inc. and Blue Apron and know what business these recent hot IPO companies are in. Download/print the Balance Sheet and Cash Flow Statement for each company. Now you are going to calculate each of these companies’ average monthly cash “Burn Rate” and determine how much longer (in months) they can survive at this rate before they run out of money (“runway”). To calculate each company’s cash burn rate, on its Cash Flow Statement combine the total of its “Cash Flow from Operating Activities” with the total of its “Cash Flow from Investing Activities” for the most recent 6 month period. HOWEVER, in the Investing Activities section, IGNORE or reverse out all items relating to “Marketable Securities.” (These items just reflect how they are moving money around between various investment accounts.) When you have calculated the total Burn for the past 6 months, divide it by 6 to get the average monthly Burn Rate. Now on its Balance Sheet, look at how much money (labeled Cash and Cash Equivalents and Marketable Securities) each company had on hand at the end of the quarter. If they continue their recent monthly Burn Rate, how many months until they run out of money?

Then, do the same monthly cash Burn Rate calculation for the same period last year (2017) and compare it to this year’s (2018). Are they burning more or less cash per month than the prior year? Is this what you would expect?

Finally, write a Pitch describing your analysis of the cash Burn Rate of both Blue Apron and Snap. In this case, you are not talking to an investor about your OWN company, you are just having a general discussion of Burn Rates (perhaps during a coffee break at an investor conference) and have brought up two public company examples to show that you are financially savvy. Assume the investor has not been following these two companies so you need to explain your analysis very clearly so it is easy to understand without slides or handouts, which of course you wouldn’t have during a casual chat. Make sure you “tell a story” about these companies and how they are burning cash, don’t just recite a bunch of numbers. Presentation must be easy for audience to understand, logical and accurate, well rehearsed and use 2.5-3 minutes,

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