Liquidity & Runway: Can You Survive?
Profit is about the year. Liquidity is about next month. These are the numbers that decide whether you make it that far.
5 min readIntermediateUpdated July 2026
Key takeaways
Liquidity measures how easily you can cover short-term bills as they come due.
Burn rate is how much cash you lose each period; runway is how many months of it you have left.
The current ratio compares what you can turn into cash soon against what you owe soon.
What liquidity actually means
Liquidity is simply how quickly something can become spendable cash, and by extension, how easily the business can pay bills that are due soon. Cash is perfectly liquid. A delivery van is not.
The classic quick check is the current ratio: everything you can turn into cash within a year, divided by everything you owe within a year. Above 1 means you can cover the next twelve months on paper.
Burn rate and runway
- Burn rate is how much cash you lose in a period. If you start the month with $50,000 and end with $40,000, you burned $10,000.
- Runway is cash ÷ burn rate: the number of months before the tank hits empty at the current pace. $40,000 in the bank and a $10,000 monthly burn is four months of runway.
Runway is a countdown, not a cushion
A four-month runway means every plan you have needs to change the trajectory before month four: raising money, cutting burn, or growing revenue. Knowing the number early is what gives you time to act.
See it in a real model
The fastest way to make this stick is to build one and watch the numbers move.
Open the builderRelated reading
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