Glossary
What is cash runway?
Cash runway is the number of months a business can keep operating at its current rate of spending before cash runs out. It is cash on hand divided by average monthly net burn (cash out minus cash in). A snapshot, not a forecast: it assumes the next month looks like the recent average.
Runway is usually quoted in months and recalculated monthly once the books are closed. Two versions are common: the standard figure uses net burn, and a stress-test figure uses cash out alone, as if receipts stopped tomorrow.
Because it follows cash rather than profit, runway can shorten while the profit and loss still shows a profit: customers paying later, stock building up, a tax payment landing or a loan repayment all take cash without touching profit.
Related
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