Cash burn

Measure the cash consumed by operations under a defined perimeter and connect it to liquidity, milestones and financing timing.

Quick answer

Cash burn is the rate at which a business consumes cash over a period. Companies define the metric differently; it may focus on operating cash use, include capital expenditure or adjust for specified non-ordinary items and partnership receipts. The definition must be reconciled to the cash-flow statement.

Use the worked example

Meaning and transaction use

An SEC filing defines cash burn using operating cash use, selected adjustments, partnership inflows and capital expenditure, and states that it is a non-GAAP measure without a standard methodology. [S1]

The same filing reconciles cash burn with the most directly comparable GAAP cash-flow measure and explains that it is not total cash change. [S1]

An SEC-filed venture-fund prospectus identifies runway and burn rate among investment factors. [S2]

Worked example

Illustrative runway screen only. Assume 24.0 million of available unrestricted cash and forecast cash consumption of 9.0 million over six months.

Scroll the table horizontally to view all columns.

Measure	Calculation	Result
Six-month cash consumption	Given	9.0m
Average monthly burn	9.0 / 6	1.5m
Available unrestricted cash	Given	24.0m
Constant-burn runway	24.0 / 1.5	16 months

The simple runway is 16 months; the monthly forecast may produce a different financing date.

Proposed transaction review process

Define burn

Set cash perimeter, adjustments, capital expenditure and period.

Reconcile history

Tie the measure to operating, investing and financing cash flows.

Forecast monthly

Model receipts, payroll, suppliers, capital spending and milestones.

Set triggers

Define financing, cost, hiring and contingency decision dates.

Evidence checklist

Cash

Bank balances, restrictions, deposits and minimum liquidity.

Historical burn

Cash-flow statement and adjustment reconciliation.

Forecast

Monthly receipts, costs, capital expenditure and milestones.

Funding

Committed capital, conditions, timing and downside alternatives.

Decision framework

Situation	Proposed action
Burn rises above plan	Identify driver, preserve liquidity and reforecast milestones.
Funding is conditional	Exclude it from available cash until conditions are supportable.
Growth spend has weak economics	Compare marginal CAC, LTV and payback before continuing.
Runway approaches the trigger	Execute the approved financing or contingency plan.

Common errors to check

Using net loss as cash burn.
Including restricted cash as available.
Assuming burn remains constant.
Reporting runway without a financing lead-time trigger.

Build the cash-runway control

Bring bank balances, cash-flow statements and the monthly operating plan to a burn review. Reconcile runway and financing triggers.

Discuss the transaction

Primary references and editorial scope

SEC filing: Cash-burn definition and reconciliation
Example non-GAAP cash-burn definition, reconciliation and limitations. Reference checked 17 September 2026.
SEC filing: Venture screening factors
Example inclusion of runway and burn rate in venture-investment assessment. Reference checked 17 September 2026.

Editorial qualification

General transaction education using public United States filings. Figures are hypothetical. Cash burn is a non-standard measure and runway is a forecast subject to operating and financing uncertainty.

General business information. Obtain advice appropriate to the legal, tax, accounting and financing facts. No offer, lender commitment or transaction outcome is represented. All worked examples use expressly assumed figures. Editorial draft date: 17 September 2026.