Cash ratio calculator
- Formula
- Cash and equivalents ÷ Current liabilities
Cash ratio = Cash and equivalents ÷ Current liabilitiesCash ratio
0.69×
How it’s worked out
- 1Cash ÷ current liabilities$900,000 ÷ $1,300,0000.69×
Runs in your browser; nothing you type is sent anywhere. Amounts in US dollars.
Worked on a real month of books
Northwind Traders, Inc., September 2026 (accrual basis, USD), the month the free course is taught on. Every figure is read off the course's posted ledger, not typed.
- 1Cash ÷ current liabilities$32,900 ÷ $9,4503.48×
See the statements these come from in the course.
How to read it
The cash ratio asks what share of current liabilities could be paid today, from the bank, with nothing collected and nothing sold.
For a startup it is close to the question investors actually ask: how much of what we owe could we pay if revenue stopped tomorrow?
Common mistakes
- Counting restricted cash that cannot be used to pay liabilities.
- Treating a low cash ratio as a problem on its own.
Questions
- What does the cash ratio show?
- It is the strictest liquidity ratio: only cash and equivalents count. Values well below 1.0 are normal for healthy companies.
- What counts as a cash equivalent?
- Highly liquid investments with original maturities of three months or less, such as treasury bills and money-market funds.
Read it with
The metrics read alongside this one, and the terms it is confused with.
- Quick ratio calculatorQuick ratio is a liquidity and working-capital metric, calculated as (Cash and equivalents + Short-term investments + Accounts receivable) ÷ Current liabilities.Calculator
- Current ratio calculatorCurrent ratio is a liquidity and working-capital metric, calculated as Current assets ÷ Current liabilities.Calculator
- Free cash flow calculatorFree cash flow is a cash and runway metric, calculated as Operating cash flow − Capital expenditures.Calculator
- Cash ratioCash ratio is a liquidity and working-capital metric, calculated as Cash and equivalents ÷ Current liabilities.Term
The formula is the one the glossary states, and the arithmetic is unit-tested. A ratio with nothing to divide by shows a dash — undefined is not zero. General information, not financial advice.