Runway

Measured as

Runway (months) = cash balance / net monthly burn

Misused when

• Using gross burn instead of net burn (runway becomes overly pessimistic).
• Ignoring working capital timing (AR/AP) and deferred revenue effects.

Operator takeaway

• Use net burn (cash outflows minus cash inflows), not accounting losses.
• Recalculate runway whenever revenue, collections, or spend changes materially.
• Tie Runway to the same balance-sheet date, scenario, and decision memo you are using elsewhere in the model.
• Document which claims, costs, or adjustments your team includes before comparing numbers across forecasts, covenants, or valuation work.

Next decision

• Quantify the impact with Cash Runway Calculator if you need to turn the definition into an operating assumption.
• Read Cash runway: how to estimate burn, break-even, and survival time if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.