Cash Ratio shows the company's ability to meet immediate-term obligations.
$$Cash\;Ratio = \frac{Cash + Marketable\; Securities}{Current\; Liabilities}$$
In addition to the above, other ratios can assess the relationship between other current assets and current liabilities (e.g., inventory or accounts receivable to current liabilities). The suitability of specific ratios depends on the industry and operations of the company.
Cash Ratio FAQ
What is the cash ratio?
It measures whether cash and marketable securities can cover current liabilities.
How do you calculate it?
Divide cash plus marketable securities by current liabilities.
