💰 Cash Ratio Calculator
Calculate cash ratio
Short-term investments that can be quickly converted to cash
How to Use This Calculator
Enter Cash
Input the cash amount - cash on hand and in bank accounts.
Enter Marketable Securities
Enter marketable securities - short-term investments that can be quickly converted to cash (e.g., treasury bills, commercial paper).
Enter Current Liabilities
Enter current liabilities - all short-term obligations due within one year.
Review Cash Ratio
See the cash ratio - the most conservative liquidity ratio. A ratio of 1.0 means cash and equivalents equal current liabilities. Higher ratios indicate stronger liquidity, but very high ratios may indicate inefficient cash management.
Formula
Cash Ratio = (Cash + Marketable Securities) / Current Liabilities
Cash & Equivalents = Cash + Marketable Securities
Example Calculation:
If cash $50,000, marketable securities $30,000, current liabilities $40,000:
• Cash & equivalents = $50,000 + $30,000 = $80,000
• Cash ratio = $80,000 / $40,000 = 2.0
• This means cash and equivalents are 2x current liabilities
About Cash Ratio Calculator
A cash ratio calculator helps you calculate the cash ratio, which is the most conservative liquidity ratio. The cash ratio measures a company's ability to pay short-term obligations using only cash and cash equivalents (marketable securities). It's calculated as (Cash + Marketable Securities) / Current Liabilities. The cash ratio is more conservative than the current ratio or quick ratio because it excludes inventory and receivables. A ratio of 1.0 means cash and equivalents equal current liabilities. Higher ratios indicate stronger liquidity, but very high ratios may indicate inefficient cash management.
When to Use This Calculator
- Liquidity Analysis: Assess immediate liquidity position
- Financial Health: Evaluate ability to pay short-term obligations
- Credit Analysis: Assess creditworthiness and liquidity risk
- Cash Management: Evaluate cash management efficiency
Understanding Cash Ratio
- Most Conservative: Only includes cash and marketable securities
- Ratio of 1.0: Cash equals current liabilities
- Higher Ratio: Stronger liquidity (but may indicate inefficient cash use)
- Lower Ratio: Lower liquidity (may indicate liquidity risk)
Why Use Our Calculator?
- ✅ Liquidity Analysis: Calculate cash ratio accurately
- ✅ Financial Health: Assess liquidity position
- ✅ Credit Analysis: Evaluate creditworthiness
- ✅ Cash Management: Assess cash management efficiency
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is cash ratio?
Cash ratio is the most conservative liquidity ratio that measures a company's ability to pay short-term obligations using only cash and cash equivalents (marketable securities). It's calculated as (Cash + Marketable Securities) / Current Liabilities. A ratio of 1.0 means cash and equivalents equal current liabilities. The cash ratio is more conservative than the current ratio or quick ratio because it excludes inventory and receivables.
What's a good cash ratio?
A ratio of 1.0 or higher is generally considered good, as it means cash and equivalents can cover current liabilities. However, very high ratios (above 2.0) may indicate inefficient cash management - excess cash could be invested or used for growth. The "good" ratio depends on the industry and business model. Compare to industry benchmarks and consider cash management efficiency.
How is cash ratio different from current ratio and quick ratio?
Cash ratio only includes cash and marketable securities, making it the most conservative. Current ratio includes all current assets (cash, receivables, inventory). Quick ratio includes cash, marketable securities, and receivables (but not inventory). Cash ratio is the most conservative because it excludes receivables and inventory, which may not be immediately convertible to cash.
Why is cash ratio important?
Cash ratio is important because it measures the most immediate liquidity - the ability to pay short-term obligations using only cash and cash equivalents. It helps: (1) Assess immediate liquidity position, (2) Evaluate ability to pay short-term obligations, (3) Assess creditworthiness and liquidity risk, (4) Evaluate cash management efficiency. However, very high ratios may indicate inefficient cash management, as excess cash could be invested or used for growth.