Cash Ratio Calculator
Calculate cash ratio for liquidity analysis
About this calculator
The Cash Ratio Calculator determines a company's ability to pay off short-term debts using only cash and cash equivalents. This financial metric provides the most conservative measure of liquidity by excluding accounts receivable and inventory from the calculation. It's essential for investors, creditors, and financial analysts to assess immediate financial stability and evaluate whether a company can handle urgent obligations without converting other assets to cash.
How to use
Enter the company's total cash and cash equivalents in the first field, then input the current liabilities amount. The calculator will instantly compute the cash ratio by dividing cash by current liabilities. A ratio above 0.2 generally indicates good short-term liquidity position.
Frequently asked questions
What is a good cash ratio?
A cash ratio between 0.1 and 0.2 is typically considered healthy, indicating sufficient liquidity without excessive idle cash.
How does cash ratio differ from current ratio?
Cash ratio only uses cash and equivalents, while current ratio includes all current assets like inventory and receivables.
Why might a high cash ratio be concerning?
Very high cash ratios may suggest poor cash management or missed investment opportunities for business growth.