cash ratio

Definition

Total dollar value of cash and marketable securities divided by current liabilities. For a bank this is the cash held by the bank as a proportion of deposits in the bank. The cash ratio measures the extent to which a corporation or other entity can quickly liquidate assets and cover short-term liabilities, and therefore is of interest to short-term creditors. also called liquidity ratio or cash asset ratio.

Use cash ratio in a sentence

With Radio Shack's ever dwindling cash ratio, it was very apparent that the company would not make it another year, to the sadness of many.

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Jill calculated the cash ratio of the business and discovered that in case of an emergency, the company would have a difficult time liquidating its assets.

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Never Last Co, a new housing company, was able to weather the 2008 economic downturn in a troubled industry due strictly to their strong Cash Ratio. Never Last Co. had tremendous reserves, and minimal debt, which allowed them to keep their head above water in a declining market.

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cash price ratio