Enter the total cash and cash equivalents along with the current liabilities into the calculator. The calculator will evaluate and display the cash ratio of the business.
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Cash Ratio Formula
The following formula can be used to calculate the cash ratio of a business.
CR = C / CL
- Where CR is the cash ratio
- C is the cash and cash equivalents
- CL is the current liabilities.
Cash Ratio Definition
A cash ratio is a financial measure of how “liquid” or solvent a business is. In other words, how much cash a business has relative to it’s liabilities. A larger cash ratio means a company has a greater amount of cash to work with respect to it’s liabilities. This typically means the business is more profitable.
Cash Ratio Example
How to calculate a cash ratio?
- First, determine the total cash.
Calculate the total cash and cash equivalents of a business.
- Next, determine the current liabilities.
Calculate the current liabilities owned by the company.
- Finally, calculate the cash ratio.
Using the formula above, calculate the cash ratio.
FAQ
A cash ratio is the ratio of cash and cash equivalents to the total cost of liabilities that a company owns. This ratio is used to measure liquidity in a company.
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