Why This MattersRead the earlier reference in its original context, with its historical statements and limits preserved.
Distinguish net worth, available liquidity, monthly cash flow, income coverage, and runway. Read each equation with its units, assumptions, and stated limits.
2 Min Read · Archived Foundation Specification
Preserved Foundation Text / v0.2This archived section describes an earlier release. Its historical statements about deployment and unbuilt tools refer to that edition.
M01 · W(t) = A(t) - D(t)Balance-sheet identity. Specify valuation date, ownership and attributable obligations. If business equity is already net of business debt, do not subtract the same debt again.
M02 · L(0) = L(pre) - POpening liquidity after a cash acquisition; L(pre) is cash before that use. The model flags an unfunded opening payment even if later income would make the ending balance positive.
M03 · L(t) = L(t-1) + Y(t) + N(t) - E(t) - Q(t) - I(t) - Z(t)Monthly cash identity for t = 1 through the declared horizon. Every payment appears once. A negative result is an unmet cash need, not permission to overdraw or an assumed loan.
M04a · C(t) = N(t) / E(t), for E(t) > 0Asset-income coverage. Negative asset cash produces negative coverage. Zero essentials makes this ratio undefined. Coverage is not a full financial-independence test.
M04b · R(s) = L / [E(s) - Y(s) - N(s)], if the denominator > 0Constant-flow runway in months. For a no-earned-income case set Y to zero. This simple estimate excludes Q and I; a full planned-spending forecast uses M03. If the denominator is nonpositive, report no projected monthly deficit under these assumptions, not infinite security.
Example: $12,000 cash, $3,000 monthly essentials and $1,000 net asset income yield six months of no-earned-income runway. After a $3,000 emergency and loss of that asset income, runway is three months. These results follow from stated assumptions, not from a prediction that the income will persist.
Runway, net worth and coverage answer different questions. Show them separately. Neither a high asset value nor eventual recovery of cash erases a shortage during the intervening months.