Cash Ratio | Define, Formula, Calculation, Interpretation >1, =1, <1

Cash ratio, also known as absolute cash ratio, is one of the stringent liquidity ratios and it defines the immediate ability of the company to pay off its short term commitments. Other vital liquidity ratios are current ratio and quick ratio (or acid-test ratio). Cash ratio is useful for creditors in assessing the probability of timely payment of their dues.