Cash Burn

Cash burn means the rate at which a company spends more cash than it generates. In simple terms, cash burn shows how quickly a company is using up its cash. Cash burn is important because it helps investors understand how long a company can operate before it needs more funding. It is especially important for startups and companies that are not yet profitable. For example, if a company has $100 million in cash and burns $10 million per month, it may have about 10 months of cash runway. Cash burn is not always bad. A company may burn cash while investing for growth, but it becomes risky if cash runs out before the business improves.