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
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3 Minute Introduction to Financial Ratio Analysis: Why do it and What are the Main Types? Types of Financial Ratios, Financial Ratio Analysis, Financial Ratio Types Why financial ratio analysis?
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Cash Ratio Diagram Measuring Liquidity Download and edit the 12manage PowerPoint model for limited personal, educational and business use.
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Compare with: Current Ratio
 Quick Ratio 
ZScore 
Cash Flow from Operations
 Dividend Payout Ratio
 Discounted Cash Flow 
Free Cash Flow 
Economic Value Added 
CFROI 
Return on Invested Capital
 Economic Margin
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