what is the cash ratio 
the cash ratio is a measurement of a company s liquidity it calculates the ratio of a company s total cash and cash equivalents to its current liabilities the metric evaluates a company s ability to repay its short term debt with cash or near cash resources such as easily marketable securities this information is useful to creditors when they decide how much money if any they would be willing to loan to a company cash ratio formulathe cash ratio is generally a more conservative look at a company s ability to cover its debts and obligations compared to other liquidity ratios it sticks strictly to cash or cash equivalent holdings leaving other assets such as accounts receivable out of the equation the formula for a company s cash ratio is cash ratio cash cash equivalents current liabilities1