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Financial Analysis

  Financial Analysis   |   Terms
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  • September 17, 2020
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Cash Ratio

A short-term solvency measure or liquidity measure that relates cash and cash equivalents to current liabilities:

Cash Ratio

A healthy cash ratio indicates that a company is able to meet its obligations towards short-term creditors. Suppose a company has $100,000 in liabilities and $30,000 in cash, then:

Cash ratio = 30,000/ 100,000= 0.3 times

This indicates that the company keeps $0.3 in cash for every $1 of obligations.


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