Cash Burn: Overview, Formula, Examples

By Jeremy Bowman – Updated Jul 25, 2025 at 2:56 PM | Fact-checked by Frank Bass

Key Points

Cash burn measures cash losses, important for start-up survival and growth.
Investors use net cash burn to assess a company's runway and financial health.
Rule of 40 helps determine if a start-up's growth justifies its cash burn rate.

Cash burn is a key concept for investors to understand, especially those investing in start-ups, or companies that are losing money. Cash burn refers to cash losses, typically measured by operating cash flow.

Cash burn, or cash burn rate, is the rate at which a company is using up its cash reserves, or how much cash it is losing each quarter from operating the business.

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A one hundred dollar bill burning from the center outward. — Image source: Getty Images.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.