Cash ratio calculator
The cash ratio is cash divided by current liabilities. $200,000 of cash against $400,000 of bills is 0.50. The current ratio on that same $400,000 denominator keeps receivables and inventory in.
Cash ratio
0.50
$200,000 of cash against $400,000 of current liabilities.
- Cash
- $200,000
- Current liabilities
- $400,000
- Cash ratio
- 0.50
Cash and near-cash. Not receivables, not inventory.
Bills falling due within a year. The same denominator the current ratio uses.
On this page
The formula
Cash is cash and cash equivalents. Current liabilities are the bills due within a year. The ratio is a coverage, not a percent.
The strictest of the three liquidity ratios
The cash ratio takes receivables and inventory out, not only inventory:
$200,000 of cash against $400,000 of current liabilities is 0.50. That $400,000 is the same bills figure the current ratio uses. The current ratio keeps every current asset in. The quick ratio takes inventory out and keeps receivables. This page takes both out. Cash $200,000 is not the wholesale current-asset pile.
The calculator on this page is that one division. How the cash ratio works owns the 0.50. Cash ratio against quick ratio is the pair.
Cash equal to the bills
Keep the $400,000 of liabilities. Raise cash to $400,000. The cash ratio is 1. The next year of bills is covered in cash alone, before anyone collects a receivable or sells a unit of stock.
A thin cash line on the same bills
Cash $80,000 against $400,000 is 0.20. The bills did not grow. The cash pile did shrink. A 0.20 cash ratio can still sit under a current ratio above 1 if the rest of current assets are receivables and inventory.
What this page is not doing
It is not the current ratio, not the quick ratio, and not a cash forecast. The three sheets are 0.50 on $200,000, 1.00 on $400,000 of cash, and 0.20 on $80,000. This is educational material, not financial advice.
Worked examples
0.50 against 400,000 of bills
Cash is $200,000. Current liabilities are $400,000. What is the cash ratio?
- Cash ratio: .
- Half the $400,000 of bills is covered by the $200,000 of cash. That bills figure also sits on the wholesale current-ratio sheet, a different firm.
The cash ratio is 0.50. Cash is $200,000. Current liabilities are $400,000.
Cash equal to the bills
Cash is $400,000. Current liabilities are $400,000. What is the cash ratio?
- Cash ratio: .
- The bills are covered in cash alone.
The cash ratio is 1. Cash and current liabilities are both $400,000.
0.20 on a thinner cash line
Cash is $80,000. Current liabilities are $400,000. What is the cash ratio?
- Cash ratio: .
- The bills did not move. The cash line did.
The cash ratio is 0.20. Cash is $80,000.
The mistake that costs the most
Reading a 0.50 cash ratio as a failed current ratio.
The current ratio counts the whole current-asset pile. The cash ratio counts cash. A current ratio can sit above 1 while this page prints 0.50, because receivables and inventory are still in that other numerator. The wholesale teaching sheet's 1.50 and 1.10 live on a different current-asset stack.
The other error is putting short-term investments that cannot be sold tomorrow into the cash line. Cash equivalents are the near-cash pile, not a long bond fund.
Common questions
Is 0.50 too low?
It is $200,000 over $400,000 on this sheet. Grocers often run thinner cash than that against supplier credit. Compare inside a sector. This is educational material, not financial advice.
Why not take inventory out here?
Because it is already out. So are receivables. The cash ratio starts at cash. The quick ratio starts at current assets minus inventory.
Is this working capital?
No. Working capital is current assets minus current liabilities, a dollar gap. This is cash over the bills, a ratio.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.