What is a good cash ratio?


Quick Answer

A cash ratio of 1.0 for an organization means that the organization has enough cash on hand to cover its short-term obligations, while anything below 1.0 implies it has insufficient funds to cover its liabilities, according to Computerized Investing. Cash ratios do not take other assets into account, such as short-term investments or receivables, so a company's cash ratio should not be the only determining factor for measuring an organization's financial success.

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Full Answer

A cash ratio is determined by dividing an organization's current cash and equivalents by its current liabilities, as stated by Computerized Investing. A ratio higher than 1.0 means that the organization has enough cash to cover all of its liabilities as well as extra cash that can be used for other investments.

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