Overview

Cash ratio, also known as the cash asset ratio, is a liquidity ratio used to measure how well a company is able to meet its short-term debt obligations with its existing cash and equivalents. Cash ratio is a more conservative metric than the current ratio and quick ratio because it only considers cash and cash equivalents as the most liquid assets of the company that can be used to pay off debt. The formula for calculating the cash ratio is:

Cash Ratio = Cash and Cash Equivalents / Current liabilities

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