Cash Ratio

The cash ratio is a liquidity ratio that measures the company’s ability to generate cash from its current assets to cover its current liabilities. It is calculated by taking the ratio of cash and cash equivalents to current liabilities.

The cash ratio is an important measure of liquidity because it measures the company’s ability to meet its current obligations in full. If a company has a high cash ratio, it is able to meet its current obligations easily. If a company has a low cash ratio, it may not be able to meet its current obligations on time.

The cash ratio is a simple ratio to calculate, but it can be a valuable tool for Investors to use in evaluating the liquidity of a company.