Cash Ratio = Cash / Total Short-Term Liabilities
- It expresses the ability of the company to pay off its current liabilities with the cash it has.
- It shows how many times the company’s available assets cover its short-term liabilities.
Business actions to improve the ratio
- Increase Cash through Liquidation of Fixed Assets, Liquidation of Dead Stocks, Increase in Cash Sales with other incentives, e.g. Higher discount, Reduction of receivables through early repayments with corresponding incentives, Share Capital Increase
- Reduction of Total Short-Term Liabilities through repayment and reduction of Cash and Cash Equivalents, either through Restructuring of Debt in favor of Long-Term
