What is the 'Cash Ratio'
The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities. The cash ratio is most commonly used as a measure of company liquidity. It can therefore determine if, and how quickly, the company can repay its shortterm debt. A strong cash ratio is useful to creditors when deciding how much debt, if any, they would be willing to extend to the asking party.
BREAKING DOWN 'Cash Ratio'
The cash ratio is generally a more conservative look at a company's ability to cover its liabilities than many other liquidity ratios. This is due to the fact that inventory and accounts receivable are left out of the equation. Since these two accounts are a large part of many companies, this ratio should not be used in determining company value, but simply as one factor in determining liquidity.

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What is the relationship between the cash ratio and liquidity?
Understand the relationship between a company's cash ratio and its liquidity. Learn what the cash ratio measures and what ... Read Answer >> 
What are some alternative liquidity ratios to the cash ratio?
Learn what the cash ratio measures, and understand what two other liquidity ratios can be used by a company to replace the ... Read Answer >> 
What does the cash ratio of a company measure, and how does it affect decision making?
Learn what the cash ratio of a company measures, and understand why its an important liquidity ratio for a company to use ... Read Answer >> 
How can a company quickly increase its liquidity ratio?
Discover what high and low values in the liquidity ratio mean and what steps companies can take to improve liquidity ratios ... Read Answer >> 
To what extent should you take a company's liquidity ratio into account before investing ...
Find out how important it is for an investor to know a company's liquidity ratio before deciding to invest, and why relying ... Read Answer >> 
What is the difference between the cash ratio and the solvency ratio?
Understand the difference between the cash ratio and the solvency ratio. Learn why a company should be focused on both ratios ... Read Answer >>