Runway
The number of months a company can operate at its current burn rate before exhausting its cash reserves.
Runway = Cash Balance / Monthly Net Burn Rate. A company with $3M in cash and a $300K/month net burn has 10 months of runway. Maintaining a minimum of 12-18 months of runway is a common management guideline, as fundraising processes typically take 3-6 months in favorable markets and longer in difficult ones.
Runway analysis requires understanding both the current cash position and the expected trajectory of burn rate. A company ramping a sales team may expect burn to increase before it decreases, shortening effective runway. Document intelligence applied to board decks, investor updates, and financial projections can surface runway disclosures and the assumptions underlying them, which is particularly relevant in venture due diligence and credit analysis.
Related Terms
More financial Terms
10-K Filing
An annual report filed with the SEC that provides a comprehensive overview of a public company's financial performance.
Balance Sheet
A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization — a measure of a company's operating profitability.
Amortization
The gradual reduction of an intangible asset's value or a loan balance through scheduled periodic payments.
Revenue Recognition
The accounting principle that determines when and how revenue is recorded in financial statements.
Cash Flow Statement
A financial statement that tracks the movement of cash in and out of a business across operating, investing, and financing activities.
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