How many months can the company survive on its cash?
Cash runway is an estimated capacity calculated based on current cash and the rate at which cash is decreasing.
Table of contents
Remember this first
First, 3 things to remember
- 1First, look at how much cash is available to spend.
- 2Calculate based on the assumption that money decreases at the same rate.
- 3The calculation result is not a guarantee of survival duration or a period without capital increases.
It is easy to think of it as a living expenses account.
If you have 1,200,000 KRW in your account and it decreases by 100,000 KRW every month, it is 12 months' worth by simple calculation. A company's cash runway is a similar concept. Look at how much cash has decreased by combining incoming and outgoing money.
Some of a company's cash may be restricted and not freely usable. You must also check for debts that need to be repaid soon. Do not assume that all cash figures in a report can be used like living expenses.
If the spending rate changes, the duration also changes.
Below is a hypothetical company with 12,000,000 dollars in available cash. A quarter is 3 months. If it decreases by 3,000,000 dollars every quarter, it is 4 quarters, or about 12 months' worth.
Even with the same amount of cash, if it decreases by 6,000,000 dollars every quarter, it is about 6 months' worth. This is a practice calculation assuming no additional income, financing, or major expenditures.
| Money decreasing every 3 months | Number of 3-month periods it can survive | When converted to months |
|---|---|---|
| $3,000,000 | 1,200÷300=4 | About 12 months |
| $4,000,000 | 1,200÷400=3 | Approximately 9 months |
| $6,000,000 | 1,200÷600=2 | Approximately 6 months |
Distinguish between planned and actual money.
If a company builds a new factory or expands clinical trials, it may spend money faster. Conversely, if it raised cash by selling new shares, the balance will change. Also check filings made after the reference date.
"Going concern uncertainty" should be read as meaning there is uncertainty regarding the ability to continue business. It is not a confirmation of bankruptcy on a specific date. Plans to raise money are also not cash already secured.
You should not make such assumptions
“Since it is 12 months by calculation, they won't raise capital during that time, right?”
You can raise new funds even before the money runs out. Spending rates and plans can also change.
Check what you have read.
- Is it freely usable cash?
- Did you distinguish between 3-month expenditures and cumulative expenditures?
- Can future expenditures change?
Apply what you read to the actual screen
Try it on WAPE
Source and scope of verification
Reviewed · Version 2
- Beginners’ Guide to Financial StatementNew window
SEC · Verify 2026-10-20
Distinguishing between financial position, profit and loss, cash flow, and changes in equity. - How to Read a 10-KNew window
SEC Investor.gov · Verify 2026-10-20
Read the business, risk, financial, and management discussion.
This is educational material for observation and information comprehension. Hypothetical examples do not represent actual stocks or performance and do not provide buy or sell recommendations.