Term · Cash Flow & Working Capital
Cash runway
In briefCash runway estimates how long the available funds will last given an assumed net cash consumption. For companies without stable free cash flow it shows how likely a capital increase becomes.
Definition
Cash runway estimates how long available cash and cash equivalents will last given an assumed periodic net cash consumption. It is a non-standardized scenario metric.
How it is calculated
Formula. Cash runway = freely available cash and cash equivalents ÷ normalized monthly or quarterly net burn rate.
Why it matters for small caps
For smaller listed companies without stable free cash flow, cash runway determines whether a capital increase becomes likely.
Common misreadings
- A single quarter is extrapolated unchecked. Seasonal working-capital effects, minimum liquidity, debt maturities and planned investments must be taken into account.
In the process
Frequently asked
What is cash runway?
It is a scenario measure for the remaining financing runway. The basis is the freely available funds and the ongoing cash consumption.
How do you determine cash runway?
You divide the available cash and cash equivalents by the normalized monthly or quarterly net burn rate. The result shows how many periods the money still lasts.
Which assumptions can distort cash runway?
Extrapolating a single quarter unchecked is risky. Seasonal fluctuations in working capital, a required minimum liquidity, upcoming debt maturities and planned investments also belong in the calculation.
Related terms
Sources
Primary
IFRS Foundation – IAS 7 Statement of Cash Flows
https://www.ifrs.org/issued-standards/list-of-standards/ias-7-statement-of-cash-flows.html/
https://www.ifrs.org/issued-standards/list-of-standards/ias-7-statement-of-cash-flows.html/
Methodology
ESMA – Guidelines on Alternative Performance Measures
https://www.esma.europa.eu/document/esma-guidelines-alternative-performance-measures
https://www.esma.europa.eu/document/esma-guidelines-alternative-performance-measures
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.