Cash Ratio Template

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Cash Ratio Template

This Cash Ratio Template will show you how to calculate the cash ratio which measures a company’s ability to pay off short-term debt obligations with cash and cash equivalents.

Here is a preview of the template:

Cash Ratio Template Screenshot

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What is Cash Ratio?

The cash ratio, sometimes referred to as the cash asset ratio, is a liquidity ratio that measures a company’s ability to pay off short-term debt obligations with cash and cash equivalents. Compared to other liquidity ratios such as the current ratio and quick ratio, the cash ratio is a stricter, more conservative measure because only cash and cash equivalents  – a company’s most liquid assets – are used in the calculation.

The cash ratio indicates to creditors, analysts, and investors the percentage of a company’s current liabilities that cash and cash equivalents will cover. A ratio above 1 means that the company will be able to pay off its current liabilities with cash and cash equivalents.

Creditors prefer a high cash ratio as it indicates that the company can easily pay off its debt. Although there is no ideal figure, a ratio of not lower than 0.5 to 1 is usually preferred. The cash ratio figure provides the most conservative insight into a company’s liquidity since only cash and cash equivalents are taken into consideration.

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Analyst Certification FMVA® Program

Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.

 

Financial Analyst certification curriculum

 

A well rounded financial analyst possesses all of the above skills!

 

Additional Questions & Answers

CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.

In order to become a great financial analyst, here are some more questions and answers for you to discover:

 

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