The strictest of the standard liquidity ratios — only cash and cash equivalents count, nothing that needs to be collected or sold first.
How it works
Cash and cash equivalents divided by current liabilities gives the cash ratio — what share of near-term obligations could be covered immediately, without waiting on receivables or inventory sales.
What this does not include
This is a snapshot measure, not a full liquidity analysis — a business with a low cash ratio but strong, reliable receivables collection may still be in a healthy liquidity position that this narrow ratio alone doesn’t capture.
How to use this calculator
- Enter cash and cash equivalents, and current liabilities.
A worked example
Cash and equivalents $60,000 against current liabilities $90,000: cash ratio = 60,000 ÷ 90,000 = 0.666667 — a warning level, since cash alone doesn’t cover short-term liabilities.
Cash and equivalents $100,000 against the same $90,000 liabilities: ratio = 1.11 — a “good” reading, with cash alone exceeding what’s owed.
What the variables mean
| Variable | Meaning |
|---|---|
| Cash and equivalents | Cash plus highly liquid short-term investments |
| Current liabilities | Obligations due within a year |
Edge cases worth knowing
This is the strictest liquidity ratio, stricter than the current or quick ratio. It excludes everything except cash and near-cash — no receivables, no inventory — so a low cash ratio doesn’t automatically mean trouble if other liquid assets are strong.
Zero current liabilities makes the ratio undefined — there’s nothing to divide cash by, so the calculator returns no result.
Frequently asked questions
How is this different from the current and quick ratios?
The current ratio counts all current assets; the quick ratio excludes inventory; the cash ratio goes further still, counting only cash and cash equivalents — each is progressively stricter.
What’s considered a healthy cash ratio?
There’s no universal threshold — a very high cash ratio can also signal idle cash not being put to productive use, so it’s typically read alongside the current and quick ratios rather than alone.
Why would a lender care about the cash ratio specifically?
Because it shows the most conservative measure of a borrower’s immediate ability to cover obligations, useful in short-term credit risk assessment.
