MihsabaHow to use
Calculate cash and cash equivalents relative to current liabilities as a conservative liquidity measure.
- Enter Cash.
- Enter Cash equivalents.
- Enter Current liabilities.
- Calculate, then review the metric definition and comparison limits.
How it is calculated
Example
Cash of 80,000 plus 20,000 equivalents against liabilities of 200,000 gives a cash ratio of 0.5.
Important notes
This is more conservative than the quick ratio because it excludes receivables. A low value alone does not prove a liquidity problem when cash generation is strong.
Worked examples and interpreting results
Cash of 80,000 plus 20,000 equivalents against liabilities of 200,000 gives a cash ratio of 0.5.
| Case | Calculation | Result |
|---|---|---|
| Cash assets | 80000 + 20000 | 100,000 |
| Cash ratio | 100000 ÷ 200000 | 0.5 |
How to check the result
This is more conservative than the quick ratio because it excludes receivables. A low value alone does not prove a liquidity problem when cash generation is strong.
Frequently asked questions
How does it differ from quick ratio?
Cash ratio uses only cash and equivalents, while quick ratio usually also includes receivables and short-term investments.
Should the inputs use the same period?
Yes. Use figures from the same reporting period and accounting definition so balances and flows remain comparable.
Is the result enough for a decision?
No. The metric summarizes a numerical relationship; compare it with company history, industry context, and accounting or operating policies.