Cash runway is the number of months a company can keep operating before it runs out of cash if nothing changes. It is the headline number for any business that is not yet cash-flow positive, and it sets when the next raise, cost cut or credit line has to be in place.
Runway in months = cash and cash equivalents / monthly net burn. Net burn = cash paid out in a month - cash received in that month. Use a three-month average of net burn to smooth one-off payments.
A company holds $1,800,000. It receives $250,000 a month from customers and pays out $400,000, so net burn is $150,000 a month and runway is 12 months.
Using gross burn when revenue is real, or net burn when that revenue is at risk; ignoring planned hires that raise burn next quarter; and counting an undrawn credit line as cash. The full guide is burn rate.