What's considered a healthy cash ratio?

A ratio of 1.0 or higher means a business could cover all current liabilities with cash alone, though most healthy businesses operate with lower ratios and rely on a broader mix of liquid assets.

How is this different from the current ratio or quick ratio?

The current ratio includes all current assets (including inventory), and the quick ratio excludes inventory but includes receivables. The cash ratio is the strictest, counting only cash and cash equivalents.

Cash Ratio Calculator

Calculate the cash ratio — a strict measure of a business's ability to cover its short-term liabilities using only cash and cash equivalents.

Cash & equivalents

Current liabilities

Cash Ratio

0.50

How It Works

The cash ratio formula

Cash ratio = cash and cash equivalents ÷ current liabilities. Unlike other liquidity ratios, it excludes inventory and receivables — only the most liquid assets count.

Example Calculation

A business with $50,000 in cash and $100,000 in current liabilities has a cash ratio of 0.5.

Common Mistakes

Including inventory or accounts receivable in the numerator — the cash ratio only counts cash and cash equivalents (like short-term marketable securities).
Assuming a higher cash ratio is always better — an extremely high ratio can also indicate cash that isn't being put to productive use.

Frequently Asked Questions

What's considered a healthy cash ratio?: A ratio of 1.0 or higher means a business could cover all current liabilities with cash alone, though most healthy businesses operate with lower ratios and rely on a broader mix of liquid assets.
How is this different from the current ratio or quick ratio?: The current ratio includes all current assets (including inventory), and the quick ratio excludes inventory but includes receivables. The cash ratio is the strictest, counting only cash and cash equivalents.

Debt Ratio CalculatorCalculate the debt ratio from total liabilities and total assets.