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Measuring liquidity. Explanation of Cash Ratio. 
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What is the Cash Ratio? DefinitionThe 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 RatioFor 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 
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 Return to Management Hub: Decisionmaking & Valuation  Finance & Investing 

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