Cash Ratio

Knowledge Center


Measuring liquidity. Explanation of Cash Ratio.



Calculating Cash Ratio formula

What is the Cash Ratio? Definition

The Cash Ratio method is a formula for measuring the liquidity of a company by calculating the ratio between all cash and cash equivalent assets and all current liabilities.

It excludes both inventory and accounts receivable in comparison to the Current Ratio.

The Cash Ratio model measures only the most liquid of all assets against current liabilities, and is therefore seen as the most conservative of the three liquidity ratios.

Calculation of Cash Ratio

For the Cash Ratio formula, see the picture on the right.

This Cash ratio is also known as the Liquidity Ratio and Cash Asset Ratio.

The formula is an indicator of the extent to which a company can pay its current liabilities. Without relying on the sale of inventory, and without relying on the receipt of accounts receivables.

A thing to remember when you are using the Cash Ratio formula is, that it ignores the timing of both cash received and cash paid out.

Book: Steven M. Bragg - Business Ratios and Formulas : A Comprehensive Guide -

Book: Ciaran Walsh - Key Management Ratios -

Cash Ratio Special Interest Group

Special Interest Group (47 members)

Cash Ratio Forum  

Recent topics

  What is CRR in Banking?
What is meant with CRR in banking?...
  What is the Cash to Inventory Ratio? Definition
Hi, what is the Cash to Inventory Ratio? Thanks for your help......
  When is Cash Ratio Good? Rule of Thumb
What is a good cash ratio? When can we generally consider a cash ratio as sufficient?...

Best Practices - Cash Ratio
  Too much Liquidity? Decapitalization Strategies
In Strategy+Business, Issue 46, Spring 2007, BAH VP Justin Petit argues that many companies are sitting on mountains of cash and need a decapitalizati...
  Cash to Total Assets
Cash to Total Assets Ratio? ...
  What is the Cash to Liabilities Ratio? Definition
Hi I am looking to find out what is the Cash to Liabilities Ratio? Can you explain it to me?...

Expert Tips - Cash Ratio

Decapitalization Strategies


Net Income vs. Cash Flow


Limitations of Cash Flow From Operations


Accelerating Cash Flow Velocity


Advance yourself in business administration and management

Resources - Cash Ratio

3 Minute Introduction to Financial Ratio Analysis: Why do it and What are the Main Types?


Quickly Reading a Profit and Loss Statement and a Balance Sheet


Cash Ratio Diagram


News about Cash Ratio


News about Measuring Liquidity


Videos about Cash Ratio


Videos about Measuring Liquidity


Presentations about Cash Ratio


Presentations about Measuring Liquidity


Books about Cash Ratio


Books about Measuring Liquidity


More about Cash Ratio


More about Measuring Liquidity


Accelerate your management career

Compare with: Current Ratio  |  Quick Ratio  |  Z-Score  |  Cash Flow from Operations  |  Dividend Payout Ratio  |  Discounted Cash Flow  |  Free Cash Flow  |  Economic Value Added  |  CFROI  |  Return on Invested Capital  |  Economic Margin

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing

More Management Methods, Models and Theory

Special Interest Group Leader


About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2018 12manage - The Executive Fast Track. V15.0 - Last updated: 13-12-2018. All names ™ of their owners.