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Cash Ratio
The cash ratio is a liquidity ratio that measures a company's ability to pay its short-term obligation using only its cash.
About the Cash Ratio
- A ratio above 1 means the company can pay its current liabilities and have cash leftover
- A ratio below 1 means the company does not have enough cash to pay for its current liabilities
- No ideal number
- Too high is a sign of mismanagement of cash
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Example: Cash Ratio
Calculate the cash ratio for Nike, Inc. for the years 2019 and 2020, comment on the results.
Practice: Cash Ratio
Compute Microsoft, Inc.'s cash ratio for the year 2019 and 2018.
Round your final answer to 2 decimal places and enter your answer in decimal format.
