Financial metrics glossary
Cash runway: definition, formula and example
Cash runway is the number of months a company can keep operating before its cash runs out, if it keeps losing cash at its current rate. It is the cash balance divided by the monthly net burn.
Updated
Formula
- Runway (months) = Cash balance ÷ Monthly net burn
Worked example
SampleSAMPLE · Northbridge Analytics, September 2026
Northbridge Analytics, the fictional software company in the Financial Analyst's public sample, at the end of September 2026:
| Line | Amount |
|---|---|
| Cash balance | $1,454,444 |
| Net burn, 12-month average | $75,795 |
| Monthly fall in cash, forecast | $62,147 |
- On the 12-month average burn: $1,454,444 ÷ $75,795 = 19.2 months
- On the forecast: $1,454,444 ÷ $62,147 = 23.4 months
Cash runway, as the sample report prints it: 23 months (forecast)
The report states runway from the forecast, which carries the latest month's revenue and costs forward. Earlier months burned more cash, so the trailing average gives a shorter runway: the same formula, divided by a different burn.
How to read it
- Runway is a projection, not a fact: it assumes burn stays where it is. If revenue is growing, burn falls and the real runway is longer; if spending is about to rise — new hires, a launch — it is shorter.
- When one month is unusual, divide by net burn averaged over a few recent months, and say which burn the figure uses.
- Runway applies only while the company is burning cash. A company whose cash balance is stable or rising has no runway limit from operations.
- A monthly average hides the low point inside the month, when payroll and supplier payments fall due before customer receipts arrive. A weekly cash forecast shows that low point; runway does not.
Original research: Financial benchmarks for small US public companies, by industry →
Where it shows up in the monthly management report
The Financial Analyst builds a direct-method, rolling 13-week cash-flow forecast — cash in, cash out and ending balance, in base, upside and downside scenarios.
The monthly report prints its outlook on the “Cash and working capital” page: opening and closing balance, the low point and the week it falls in. The headcount plan shows how each planned hire moves runway.
- Open the sample workspace — a fictional company's books, worked by the Financial Analyst, with its monthly report. No signup.
- The Financial Analyst — what it reads from your accounting system, what the report contains and what it costs.
Related metrics
-
Burn rate
How fast a company uses up its cash each month, gross and net.
-
Operating cash flow
The cash a business's day-to-day operations bring in or use up.
-
Working capital
Current assets minus current liabilities, in dollars.
-
Revenue growth rate
The percentage change in revenue from one period to another.
Frequently asked questions
How do you calculate cash runway?
Divide the cash balance by the monthly net burn. A company with $300,000 in the bank and a net burn of $25,000 a month has 12 months of runway.
What is the difference between runway and a cash-flow forecast?
Runway is one number that assumes today's burn continues. A cash-flow forecast projects receipts and payments period by period, so it shows changes in burn and the lowest point the balance reaches.
Does runway include money a company expects to raise?
Not normally: runway is calculated from cash in the bank. A scenario that includes expected funding should be labelled as one, because the money is not there until it arrives.
How can a company extend its runway?
Lower net burn — cut or defer costs, raise prices, collect receivables faster — or add cash through equity or debt financing.