Cash Ratio Calculator
Measure company liquidity and ability to pay short-term debts with liquid assets
Calculate Cash Ratio
Cash and Cash Equivalents
Short-term debts and obligations due within one year
Cash Ratio Results
Cash & Equivalents
$0
Current Liabilities
$0
Formula: Cash Ratio = (Cash + Cash Equivalents) ÷ Current Liabilities
Calculation: $0 ÷ $0 = 0.00x
Analysis: Enter values to calculate
Liquidity Analysis
Example: Company Alpha Analysis
Company Information
Cash Balance: $1,200,000
Demand Deposits: $3,200,000
Savings Account: $500,000
Money Market: $5,300,000
Treasury Bills: $4,200,000
Current Liabilities: $12,000,000
Calculation
Step 1: Cash + Cash Equivalents = $1.2M + $3.2M + $0.5M + $5.3M + $4.2M = $14.4M
Step 2: Cash Ratio = $14.4M ÷ $12.0M = 1.2x
Result: Excellent liquidity - company can cover all current liabilities with liquid assets
Cash Ratio Benchmarks
Excellent
Can cover all current liabilities
May indicate excess cash
Good
Solid liquidity position
Healthy balance
Fair
Adequate liquidity
Monitor cash flow
Low
Limited liquid assets
Potential liquidity risk
Financial Tips
Cash ratio focuses on most liquid assets only
Higher ratios indicate better short-term liquidity
Very high ratios may suggest inefficient cash use
Compare with industry benchmarks for context
Understanding Cash Ratio
What is Cash Ratio?
The cash ratio is a liquidity ratio that measures a company's ability to pay off its short-term debt obligations using only its most liquid assets - cash and cash equivalents. It's the most conservative liquidity ratio as it excludes inventory and accounts receivable.
Why is it Important?
- •Measures immediate liquidity without asset conversion
- •Critical for credit analysis and lending decisions
- •Indicates financial stability in crisis situations
- •Helps assess cash management efficiency
Formula Breakdown
Cash Ratio = (Cash + Cash Equivalents) ÷ Current Liabilities
- Cash: Physical currency and bank deposits
- Cash Equivalents: Money market funds, treasury bills, short-term securities
- Current Liabilities: Debts due within one year
Industry Variation: Acceptable cash ratios vary by industry. Retail companies typically have lower ratios than technology companies.
Cash Ratio vs Other Liquidity Ratios
| Ratio | Formula | Focus |
|---|---|---|
| Cash Ratio | (Cash + Cash Equivalents) ÷ Current Liabilities | Most liquid assets only |
| Quick Ratio | (Current Assets - Inventory) ÷ Current Liabilities | Excludes inventory |
| Current Ratio | Current Assets ÷ Current Liabilities | All current assets |