Cash Runway
Definition
How long a business can keep operating at its current net burn rate before it runs out of cash. It tells founders how much time they have to reach profitability or raise more funding.
Formula
Runway (months) = Cash balance ÷ Monthly net burn
Related Terms in Financial Analysis
Customer Lifetime Value (CLV)
The total profit a business expects to earn from a customer over the whole relationship. Comparing it to the cost of acquiring a customer shows whether growth spending is sustainable.
Customer Acquisition Cost (CAC)
The average cost of winning a new customer, including sales and marketing spend divided by the number of customers acquired. It is central to judging the efficiency of growth.
Churn Rate
The percentage of customers or recurring revenue lost over a period. Low churn is critical for subscription businesses, where retained customers compound into predictable revenue.
Gross Margin vs Net Margin
Gross margin measures profitability after only the direct cost of goods sold, while net margin is after all expenses, interest and tax. The gap between them shows the weight of operating and financing costs.
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