Runway measures how long a company can continue to operate without running out of cash at current levels of burn. Runway is always measured in months.

‍

Formula
‍

‍

Note that since runway is always measured in months, for quarterly and annual aggregations, runway needs to be multiplied by 3 or 12, respectively.

‍

Companies always need to keep a close eye on their runway because it dictates how long they can continue to operate without outside financing. It's important to always calculate runway using historical burn figures: assuming burn will decrease in the future, especially because of projected revenue growth, is a risky proposition that can leave companies in a tight space. It's best to be conservative with cash and try to always have at least 12 months of runway, so there is ample time to run a fundraising process or get to profitability before running out of cash.