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Cash runway
Also called: runway, months of cash, cash-out date, funding gap
How many months a company can keep operating on the cash it has, at its current burn rate, before it must raise more.
Explanation
Runway is cash divided by monthly burn. A company with $12 million of cash and short-term investments burning $2 million a month has six months. The date the money would run out is the cash-out date.
The figure from the last balance sheet is already old when you read it: a 10-Q can arrive 45 days after the quarter ends. A better estimate subtracts the burn since the balance-sheet date and adds any money raised since.
Companies rarely let runway reach zero. Most raise money with six to twelve months left, and the shorter the runway, the weaker their bargaining position and the steeper the discount.
Why it matters
Runway is the clock behind most dilution: it tells you roughly when the next raise is due, whatever management says about it.
How Equity Dictionary measures it
The Runway tile shows liquidity at the balance-sheet date divided by monthly burn. The score uses months of cash left today: estimated cash today (liquidity minus burn since the balance sheet, plus priced offerings filed since, but never ATM sales, which stay invisible) divided by monthly burn. Runway is 25% of the score: 3 months scores 95, 6 months 80, 12 months 55 and 24 months 20. It is not scored for banks, insurers, BDCs, SPACs and funds, or from a balance sheet more than about two reporting cycles old.
Related terms
- Burn rate: How fast a company uses up cash, usually measured as operating cash outflow per quarter or per month.
- Going concern: An accounting warning that a company may not be able to keep operating and paying its bills over the next year without raising money or restructuring.
- Free cash flow (FCF): Operating cash flow minus capital expenditures: the cash a business generates, or consumes, after paying to maintain and grow its assets.
- Dilution-risk score: Equity Dictionary’s 0–100 estimate of how much pressure a company is under to issue new stock, built from eight weighted factors.
- At-the-market offering (ATM): A program that lets a company sell new shares a little at a time directly into the market at prevailing prices, through a broker acting as its sales agent.
Plain-English summary for research; not legal or investment advice.