Liquidity Measurement Ratios for Analyzing a Stock ( Cash Ratio )

      

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Series: Ratio Analysis  ( 4th  post )
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Cash Ratio:

The cash ratio is generally a more conservative look at a company's ability to cover its liabilities than many other liquidity ratios. This is due to the fact that inventory and accounts receivable are left out of the equation.

Since these two accounts are a large part of many companies, this ratio should not be used in determining company value, but simply as one factor in determining liquidity.

It also ignores inventory and receivables, as there are no assurances that these two accounts can be converted into cash in a timely matter to meet current liabilities.

Formula : Cash +Cash equivalents + Invested Funds / Current liabilities

 

Example:

Go to  Moneycontrol.com  Website  here is  an Online Link for the same

http://www.moneycontrol.com/financials/relianceindustries/ratios/RI#RI 

Select the Ratios under the Financials Tab  & look for the  Liquidity And Solvency Ratios

Next Post on Ratio Analysis: Liquidity Measurement Ratios (  Profitability Indicator Ratios )  

 

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