Cash Ratio

Liquidity
Updated Apr 2026 • Has calculator

The strictest liquidity measure — cash and equivalents divided by current liabilities.

What is Cash Ratio?

The Cash Ratio is the most conservative liquidity metric, comparing only cash and cash equivalents to current liabilities. It answers a worst-case question: could the company pay off all its current obligations immediately using only cash on hand? A ratio above 1.0 is rarely seen outside of special situations; most healthy companies maintain a ratio well below 1.0 because holding excessive idle cash is inefficient. It is most useful during financial distress analysis or when evaluating a company's ability to survive a sudden loss of credit access.

Formula

Cash Ratio = Cash & Equivalents ÷ Current Liabilities

Worked Example

Worked example — Apple Inc. (AAPL)

FY2024

Step 1  Cash and cash equivalents: $29,943M
Step 2  Current liabilities: $176,392M
Step 3  Cash Ratio = $29,943M ÷ $176,392M = 0.17x
Step 4  → Apple holds $0.17 in cash per $1.00 of current liabilities — typical for a company with strong free cash flow

Source: Apple 10-K FY2024 (2024-11-01)

Calculate Cash Ratio

Cash and cash equivalents only (exclude short-term investments), in millions of USD

Total current liabilities in millions of USD

Cash Ratio

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Not investment advice.

How to Interpret Cash Ratio

< 0.1
Very Low — relies heavily on receivables and credit
0.1 – 0.5
Typical — most cash-efficient businesses operate here
0.5 – 1
Conservative — ample cash cushion
> 1
Very High — could cover all current liabilities with cash

📚 Leverage & Liquidity — Complete the path

  1. D/E Ratio
  2. Current Ratio
  3. Quick Ratio
  4. Cash Ratio
  5. Interest Coverage
Sources
  1. CFA Institute — Financial Reporting and Analysis, 6th ed., Ch. 10
  2. Investopedia — Cash Ratio