What term describes the number of months a company can operate before running out of cash?

The term that describes the number of months a company can operate before running out of cash is "Runway." Runway is a crucial metric for startups because it helps entrepreneurs understand how long they can sustain operations and pursue growth strategies without additional funding. It is typically calculated based on the current cash balance divided by the negative cash flow or burn rate, which indicates how quickly the company is using its cash reserves.

Understanding runway allows startup founders to make informed decisions about scaling, seeking investment, or adjusting their business model to extend their operational timeline. It emphasizes the importance of cash management and forecasting in the early stages of a business, as running out of cash is one of the most common reasons startups fail.

In contrast, other terms like burn rate focus specifically on the rate at which a company spends its cash, cash flow refers to the movement of cash in and out of the business, and profit margin measures profitability, none of which directly indicate how long a startup can continue to operate under current financial conditions.