That's not insignificant, and if the company had to sell enough shares to fund another year's growth at the current share price, you'd likely witness fairly costly dilution. You can see how its cash balance has changed over time in the image below.Ĭheckit's cash burn of UK£7.2m is about 33% of its UK£22m market capitalisation. A runway of this length affords the company the time and space it needs to develop the business. Therefore, from January 2022 it had 3.4 years of cash runway. Looking at the last year, the company burnt through UK£7.2m. When Checkit last reported its balance sheet in January 2022, it had zero debt and cash worth UK£24m. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.Ĭheck out our latest analysis for Checkit Does Checkit Have A Long Cash Runway?Ī cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. So should Checkit ( LON:CKT) shareholders be worried about its cash burn? In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly. For example, although software-as-a-service business lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. Just because a business does not make any money, does not mean that the stock will go down.
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