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Entrepreneurship And Management (GB 370) Gentry Test 1 Practice

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In startup finance, runway refers to how long the company can operate before needing additional funds given current burn rate.
Correct Answer:
The amount of time the startup can operate before needing more funding, given current burn rate.
Explanation:
Runway is the amount of time a startup can operate before needing additional funds, given the current burn rate. Burn rate is how fast cash is leaving the business each month, so runway uses the current cash on hand divided by that monthly burn to estimate how long you can keep operating. This concept matters because it tells you when you’ll need to raise more capital or take steps to reduce costs. The total investment raised to date doesn’t tell you how long you can run without new funds, and the number of employees or a planned marketing budget aren’t direct measures of how long operations can continue at the current spending pace.

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