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We can readily understand why investors are attracted to unprofitable companies. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.
Given this risk, we thought we'd take a look at whether Inno Holdings (NASDAQ:INHD) shareholders should be worried about its cash burn. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.
When Might Inno Holdings Run Out Of Money?
You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. Inno Holdings has such a small amount of debt that we'll set it aside, and focus on the US$3.9m in cash it held at March 2025. Looking at the last year, the company burnt through US$5.6m. Therefore, from March 2025 it had roughly 8 months of cash runway. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. The image below shows how its cash balance has been changing over the last few years.
View our latest analysis for Inno Holdings
How Is Inno Holdings' Cash Burn Changing Over Time?
In our view, Inno Holdings doesn't yet produce significant amounts of operating revenue, since it reported just US$1.6m in the last twelve months. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. Over the last year its cash burn actually increased by 41%, which suggests that management are increasing investment in future growth, but not too quickly. That's not necessarily a bad thing, but investors should be mindful of the fact that will shorten the cash runway. In reality, this article only makes a short study of the company's growth data. You can take a look at how Inno Holdings is growing revenue over time by checking this visualization of past revenue growth.
How Hard Would It Be For Inno Holdings To Raise More Cash For Growth?
Since its cash burn is moving in the wrong direction, Inno Holdings shareholders may wish to think ahead to when the company may need to raise more cash. Companies can raise capital through either debt or equity. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).