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GMetrix Entrepreneurship And Small Business (ESB) Certification Practice Exam

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If a startup has available cash of $500,000 and a burn rate of $50,000 per month, how many months of runway does that provide?
Correct Answer:
10 months
Explanation:
Runway is how long your current cash will last at the current spending pace. It’s found by dividing available cash by the monthly burn rate. With five hundred thousand on hand and a burn rate of fifty thousand per month, the calculation is five hundred thousand divided by fifty thousand, which equals ten. So the runway is ten months. This assumes the burn rate stays constant and no additional funding comes in. If you reduce spending or increase revenue, runway can be extended; if spending rises, or cash dollars decrease, runway shortens. Ten months.

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