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Cash Ratio
The Cash Ratio is even more stringent than the Current Ratio and Quick Ratio in examining the liquidity of a company. The Cash Ratio examines a company's very short term ability to pay debts as they come due. This ratio is a measure of a company's ability to meet its current obligations to creditors. The formula is:
(Cash + Short Term Marketable Securities) / Current Liabilities
© 2011. Michael C. Dennis. All Rights Reserved