Cash ratio: drag the cash
Drag the bar to set cash. Current liabilities stay put, so the cash ratio moves only because the cash line does. Raise cash and coverage rises. Two hundred thousand of cash on four hundred thousand of bills is 0.50. Receivables and inventory are out of this picture.
Cash ratio
0.50
Cash
$200,000
Raise cash and the ratio rises. Current liabilities stay $400,000. Illustrative arithmetic, not a rating or advice.
Current liabilities
$400,000, held still so only the cash line moves.
In short
- Drag the bar up for more cash and a higher cash ratio.
- Read the figure as a coverage multiple, not as a percent.
- Watch the bills stay put. Only the cash line is moving.
- Focus the handle and use the arrow keys to step cash.
Coverage by cash alone
The cash ratio is cash over current liabilities. How the cash ratio works is that identity, with the cash ratio calculator under the answer.
The quick ratio keeps receivables. Cash ratio against quick ratio is that last strip-out.
When cash equals the bills
When cash matches the bills, the ratio is 1. The next year of bills is covered without waiting on a customer or a warehouse. A 1 is not a profit, and it is not a claim that the firm should hold this much.
What the drag will not do
It will not add receivables or inventory back in, and it will not forecast next week's cash. It is educational material, not financial advice.
Common questions
Why does dragging up raise the ratio?
Because the bar is the cash ratio. Higher coverage is more cash on fixed bills. Arrow up steps cash up so the bar and the keys agree.
Is 0.50 a failing grade?
No. It is cash over the bills on the teaching sheet. Many sound firms run below 1. It is educational material, not a rating.
Why take receivables out?
Because a receivable still has to be collected. The quick ratio keeps it in. This picture does not.
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.