Reading the accounts
Runway
How long a loss-making company can operate before it runs out of cash at the current burn rate.
How it works
Runway is cash divided by monthly burn. Under twelve months usually forces a capital raise, and raising from weakness is expensive for existing shareholders.
Where it misleads people
Runway calculations usually assume burn stays constant. It rarely does — growing companies burn more as they grow, so stated runway tends to be optimistic.
Formula
Runway in months = cash and equivalents ÷ monthly cash burnRelated terms
Mentioned in
More in Reading the accounts
- Share-based compensation
- Revenue
- Tangible book value
- Return on invested capital
- Working capital
- Return on equity
- Writedown
- Owner earnings
All 51 Reading the accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.