Cash Runway: How to Calculate It From a 10-Q
How to calculate cash runway from a 10-Q: find the cash, measure monthly burn, adjust for the time since quarter end, and read the notes that change the number.
What is cash runway?
Cash runway is an estimate of how long a company can keep operating on the cash it has, at the rate it is currently spending. For a company that loses money, it is the number that most often determines when the next share sale happens, which is why it sits at the centre of dilution research.
The basic formula is simple: liquid cash divided by monthly cash burn. The work is in picking the right inputs from the 10-Q, adjusting for the time that has passed since the quarter ended, and reading the notes for anything that changes the picture. This guide walks through it with one worked example.
Step 1: find the cash
On the balance sheet, add up the liquid resources:
- Cash and cash equivalents. Always included.
- Short-term investments or marketable securities. Usually Treasury bills or money market funds the company can turn into cash quickly. Include them.
- Restricted cash. Exclude it, or note it separately. It is held as collateral or for a specific purpose and cannot pay ordinary bills.
Long-term investments are less liquid and are usually left out of a conservative estimate.
Step 2: find the burn
Use the cash flow statement, not the income statement. Net loss includes non-cash items such as stock-based compensation and depreciation, and it ignores changes in working capital, so it can be far from the actual cash leaving the business.
The measure most people use is net cash used in operating activities, often with capital expenditures added, since buying equipment also consumes cash. One trap: the cash flow statement in a 10-Q is year to date. A third-quarter 10-Q shows nine months, not three. To get one quarter, subtract the six-month figure from the prior 10-Q, or divide the year-to-date total by the number of months it covers.
Step 3: divide, then adjust for time
Runway in months = liquid cash ÷ monthly burn. But that answer is measured from the balance sheet date, the last day of the quarter. A 10-Q is filed weeks later, often 40 to 45 days after quarter end for smaller companies, so some of that runway was already used by the time you read it.
A worked cash runway example
Hypothetical Company X files its third-quarter 10-Q on November 14 for the quarter ended September 30.
| Item from the 10-Q | Amount |
|---|---|
| Cash and cash equivalents | $12,000,000 |
| Short-term investments | $3,000,000 |
| Restricted cash | $500,000 |
| Net cash used in operating activities, nine months | $13,500,000 |
| Purchases of property and equipment, nine months | $450,000 |
All figures are hypothetical.
Liquid cash: $12,000,000 + $3,000,000 = $15,000,000. Restricted cash is excluded.
Monthly burn: ($13,500,000 + $450,000) ÷ 9 = $1,550,000 a month.
Runway from September 30: $15,000,000 ÷ $1,550,000 = 9.7 months, which points to roughly mid-July of the following year.
Runway from the filing date: about 1.5 months passed between September 30 and November 14, so roughly 8.2 months remained when the 10-Q was filed.
To run the same arithmetic on another company’s 10-Q figures, use the cash runway calculator.
Step 4: check whether the burn is changing
A nine-month average can hide a trend. Suppose Company X's six-month 10-Q showed operating cash outflow of $8,100,000. Then the third quarter alone used $13,500,000 − $8,100,000 = $5,400,000, or $1,800,000 a month, faster than the nine-month average of $1,500,000 (operating only). Using the latest quarter:
| Burn basis | Monthly burn incl. capex | Runway from Sept 30 |
|---|---|---|
| Nine-month average | $1,550,000 | 9.7 months |
| Latest quarter | $1,850,000 | 8.1 months |
All figures are hypothetical. Capex is spread evenly at $50,000 a month in both rows.
Neither row is "the" answer. They are a range. A clinical trial starting, a product launch or a cost-cutting program can move burn sharply, and the MD&A section of the 10-Q often says which way management expects spending to go.
Step 5: read the notes for what changes the number
Several disclosures can move runway by months:
- Subsequent events. The last note in the financial statements lists events after quarter end. If Company X sold $4,000,000 of stock through its ATM program in October, its cash at filing was higher than the balance sheet shows.
- Debt maturities. A $5,000,000 note due in six months is a cash need the burn rate does not capture.
- Liquidity section of the MD&A. Management states how long it believes current resources will last. That statement is the company's own estimate, and it is worth comparing with yours.
- Going concern language. If management or the auditor concludes there is substantial doubt about the company's ability to continue for one year, the runway estimate and that conclusion should be read together.
- Later 8-Ks. Any financing announced in an 8-K after the 10-Q changes the starting cash.
What runway does not tell you
- How the company will fund itself. It might use an ATM, an equity line, a registered direct, debt, a partnership or asset sales. Each has a different dilution profile.
- Anything for profitable companies. If operating cash flow is positive, runway is not a meaningful measure.
- Off-balance-sheet obligations. Purchase commitments and leases are in the notes and may not show in the burn yet.
How to check a company on Signal8
- The must-raise screener lists companies whose estimated runway is short, based on reported cash and burn. Treat it as a starting list, then check the filings.
- Company pages have a Financials tab, for example AAPL's financials, for the balance sheet and cash flow history.
- The Dilution tab, for example AAPL's Dilution tab, is where Signal8 organises dilution data for covered small-cap issuers, including a cash position estimate where one has been modelled.
- Runway and cash estimates are one of the ways DilutionTracker alternatives differ, along with API access and coverage above $500 million in market cap.
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Shortest estimated cash runways
FAQ
How do you calculate cash runway?
Add cash, cash equivalents and short-term investments from the latest balance sheet. Take net cash used in operating activities from the cash flow statement, add capital expenditures if you want a fuller picture, and convert it to a monthly figure using the number of months the statement covers. Divide the cash by the monthly burn. Then subtract the time between the balance sheet date and today.
Should I use net loss or operating cash flow for burn?
Operating cash flow is usually better. Net loss includes non-cash expenses like stock-based compensation and depreciation, and leaves out working capital movements, so it can overstate or understate the cash actually spent. Many analysts use operating cash outflow plus capital expenditures as the burn figure.
Why is the cash flow statement in a 10-Q year to date?
SEC rules require the interim cash flow statement to cover the fiscal year to date. A third-quarter 10-Q therefore shows nine months of cash flows. To isolate a single quarter, subtract the previous 10-Q's year-to-date figure.
Does a short runway mean a company will issue shares soon?
Not necessarily. It means the company will need cash from somewhere if spending continues at the measured rate. It might raise equity, borrow, sign a partnership, sell assets or cut costs. Runway describes the need, not the outcome or its timing.
See it on DilutionScan
Companies DilutionScan covers, with the instruments read from their SEC filings. Open one to see each instrument and the filing it came from.
- GNSGenius Group Limited8 warrant series, 1 convertible, 1 ATM program, 3 shelf registrations and 2 completed offerings on file
- SMXSMX (Security Matters) Public Limited Company Ordinary Shares10 warrant series, 8 convertibles, 2 equity lines, 4 shelf registrations, 4 S-1 registrations and 2 completed offerings on file
- MLGOMicroAlgo, Inc. Ordinary Shares2 warrant series, 5 convertibles and 2 shelf registrations on file
- HOLOMicroCloud Hologram Inc. Ordinary Shares2 warrant series, 1 convertible, 3 shelf registrations and 2 completed offerings on file
Terms in this guide
- Cash runway
- Cash runway is an estimate of how many months a company's cash could fund its operations at its recent rate of cash burn, before any new financing.
- Form 10-Q
- A Form 10-Q is the quarterly report a US public company files for each of its first three fiscal quarters, with unaudited financial statements, due 40 or 45 days after quarter end.
- Going concern warning
- A going concern warning is a disclosure of substantial doubt about a company's ability to keep operating and meet its obligations for one year after its financial statements are issued.
- At-the-market (ATM) offering
- An at-the-market (ATM) offering is a program that lets a company sell newly issued shares into the open market at prevailing prices, a little at a time, through a sales agent.
- Form 8-K
- A Form 8-K is the SEC current report a public company files, generally within four business days, to disclose material events such as agreements, offerings, executive changes and listing notices.
Related guides
- Going Concern Warning: What Substantial Doubt MeansWhat a going concern warning means, who decides there is substantial doubt, where it appears in a 10-K or 10-Q, and how to check the cash math behind it.
- What Is an ATM Offering? At-the-Market Sales ExplainedWhat an at-the-market (ATM) offering is, how the sales agreement and 424B5 work, how fast an ATM can sell shares, and where its sales show up in later filings.
- What Is Stock Dilution? How New Shares Affect YouStock dilution explained with worked numbers: what happens to your ownership when a company issues new shares, and where to spot it coming in SEC filings.
- How to Read a 10-Q and 10-K: Five Sections FirstHow to read a 10-Q or 10-K on a small cap. The five sections that show cash runway, going concern doubt and potential dilution, plus filing deadlines.
- How to Trade Penny Stocks Without Getting DilutedA dilution-first guide to penny stocks. How new shares reach the tape, which SEC filings announce them, worked examples, and a 20-minute filing check.
- How to Check a Penny Stock for Dilution in 20 MinutesA six-step filing checklist for dilution risk in a small-cap stock. What to open on EDGAR, which phrases to search for, and the four numbers to write down.
Check any ticker for dilution
DilutionScan reads each covered company's SEC filings and lists its warrants, convertibles, ATM programs, shelves and S-1s on one page, with a dilution rating and cash runway.
This guide is from the Signal8 Academy, the research team behind DilutionScan. Educational content only. DilutionScan and Signal8 are not broker-dealers or investment advisers, and nothing here is a recommendation to buy or sell any security.