Burn measures the change in a company’s cash balance over a period, not including cash received from financing activities.

Burn Formula

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Cash is king, and burn measures of much cash a company is consuming. There are many reasons why burn may diverge from GAAP net income.

For example, annual contracts with upfront payments create positive cash flow cycles, while loan products create negative ones. Analyzing burn reveals these cash flow patterns and helps companies ensure they have the reserves they need to survive.