We can readily understand why investors are attracted to unprofitable companies. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

Given this risk, we thought we'd take a look at whether Qingling Motors (HKG:1122) shareholders should be worried about its cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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How Long Is Qingling Motors' Cash Runway?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. When Qingling Motors last reported its December 2024 balance sheet in April 2025, it had zero debt and cash worth CN¥3.0b. In the last year, its cash burn was CN¥48m. So it had a very long cash runway of many years from December 2024. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. Depicted below, you can see how its cash holdings have changed over time.

See our latest analysis for Qingling Motors

How Well Is Qingling Motors Growing?

Qingling Motors managed to reduce its cash burn by 91% over the last twelve months, which is extremely promising, when it comes to considering its need for cash. And while hardly exciting, it was still good to see revenue growth of 15% during that time. We think it is growing rather well, upon reflection. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic earnings and revenue shows how Qingling Motors is building its business over time.

How Easily Can Qingling Motors Raise Cash?

While Qingling Motors seems to be in a decent position, we reckon it is still worth thinking about how easily it could raise more cash, if that proved desirable. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive 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).

Qingling Motors' cash burn of CN¥48m is about 2.5% of its CN¥1.9b market capitalisation. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

So, Should We Worry About Qingling Motors' Cash Burn?

It may already be apparent to you that we're relatively comfortable with the way Qingling Motors is burning through its cash. In particular, we think its cash burn reduction stands out as evidence that the company is well on top of its spending. And even though its revenue growth wasn't quite as impressive, it was still a positive. After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. An in-depth examination of risks revealed 1 warning sign for Qingling Motors that readers should think about before committing capital to this stock.

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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.