What is a Cash Ratio?
Sometimes referred to as a liquidity ratio, the cash ratio is a measurement strategy that can help determine how quickly a corporation could settle any outstanding liabilities by liquidating cash assets. In order to calculate the cash ratio, all that is necessary is a current listing of the liabilities and any cash and marketable securities that could be used to discharge the debts. Understanding the current cash ratio can be helpful for several reasons. For current officers and shareholders in a company, the cash ratio is an excellent indicator of the financial stability of the business. When it can be demonstrated that the corporation is keeping a healthy balance between the marketable securities and the level of current liabilities, the efforts can focus more on growing the company, rather than attempting to simply maintain current sales and productivity. Greater cash assets and lower liabilities means there are resources to devote to product development and new marketing strategies
” Sometimes referred to as a liquidity ratio, the cash ratio is a measurement strategy that can help determine how quickly a corporation could settle any outstanding liabilities by liquidating cash assets. In order to calculate the cash ratio, all that is necessary is a current listing of the liabilities and any cash and marketable securities that could be used to discharge the debts. Understanding the current cash ratio can be helpful for several reasons. . For current officers and shareholders in a company, the cash ratio is an excellent indicator of the financial stability of the business.
