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The cash ratio is total cash and cash equivalents divided by current liabilities. It measures a company's ability to repay short-term debt using cash or cash equivalents.
The cash ratio formula measures the company's ability to pay off its short-term debt obligations by using only cash or near-cash assets like Cash & Bank and marketable securities. It essentially checks how a company can manage its assets during the worst-case default scenario.
What is Cash Ratio? The cash ratio, sometimes referred to as the cash asset ratio, is a liquidity metric that indicates a company’s capacity to pay off short-term debt obligations with its cash and cash equivalents.
A cash ratio greater than one indicates that a company possesses more cash and equivalents than its liabilities, suggesting robust short-term financial health. Conversely, a ratio below one could flag potential liquidity issues, prompting stakeholders to scrutinize the company’s ability to manage its obligations without resorting to ...
What is the Cash Ratio? The cash ratio is the ratio that measures the ability of the company to repay the short-term debts with the cash or cash equivalents, and it is calculated by dividing the total cash and the cash equivalents of the company with its total current liabilities.
The cash ratio or cash coverage ratio is a liquidity ratio that measures a firm's ability to pay off its current liabilities with only cash and cash equivalents. The cash ratio is much more restrictive than the current ratio or quick ratio because no other current assets can be used.
The cash ratio is a financial metric that evaluates a company’s liquidity by measuring its ability to pay off short-term liabilities with its most liquid assets.
The cash coverage ratio (CCR) is calculated by dividing cash (cash at hand or bank and demand deposits) and cash equivalents (marketable securities like T-Bills) by total current liabilities (short-term debts, accounts payable, deferred revenue, accrued income, and interest expense).
Our cash ratio calculator helps you to calculate a company's cash ratio to measure its liquidity.
Liquidity ratios provide an insight into the company's ability to generate cash quickly to cover its short-term debt obligations. They are used to evaluate the effectiveness of a company's working capital management and its overall financial stability.