Cash Ratio Calculator: The Ultimate Liquidity Stress Test

When it comes to analyzing a company’s financial health, liquidity ratios are your first line of defense. You’ve probably heard of the Current Ratio and Quick Ratio—but what about the Cash Ratio?

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This ratio is the strictest test of whether a company can meet its short-term obligations using only cash and cash equivalents. No inventory, no receivables—just pure cash power.

💡 What is the Cash Ratio?

The Cash Ratio measures a company’s ability to pay off current liabilities with the most liquid assets (cash & cash equivalents).

Formula: \\text{Cash Ratio} = \\frac{\\text{Cash & Cash Equivalents}}{\\text{Current Liabilities}}

🧮 How to Use the Cash Ratio Calculator

Enter Cash & Cash Equivalents – Include physical cash, bank balances, and liquid short-term investments.
Enter Current Liabilities – Add all obligations due within one year (accounts payable, short-term borrowings, etc.).
Click Calculate – The calculator shows your Cash Ratio instantly.

You’ll also see a color-coded indicator:

✅ ≥ 1.0 (Strong): Company can pay all short-term liabilities with cash on hand.
⚠️ 0.5 – 0.99 (Moderate): Can cover part of liabilities, but not fully.
❌ < 0.5 (Weak): High liquidity risk; not enough cash to meet obligations.

📊 Example

Cash & Equivalents: ₹50,00,000
Current Liabilities: ₹40,00,000

CashRatio=frac50,00,00040,00,000=1.25Cash Ratio = \\frac{50,00,000}{40,00,000} = 1.25CashRatio=frac50,00,00040,00,000=1.25

✅ This company has more than enough cash to cover its short-term debts.

📌 Why Does Cash Ratio Matter?

For Investors: Reveals how quickly a company can pay off debts in a crunch.
For Lenders: Gives confidence that the company can repay loans.
For Businesses: Helps assess if they’re holding too much idle cash (which could be invested elsewhere).

⚠️ Limitations

Too conservative: Many healthy businesses don’t keep a high cash ratio but still manage liquidity well through receivables and credit lines.
Idle cash: A very high cash ratio may mean missed investment opportunities.

🚀 Final Word

The Cash Ratio Calculator is like a financial stress test—it shows how well a company can survive with just its cash cushion. While it shouldn’t be the only metric you rely on, it’s a great tool for cautious investors and lenders who want to measure short-term solvency at its strictest level.

👉 Try out the calculator, plug in your company’s numbers, and see where you stand!