abhishreshthaa
Abhijeet S
CASH RATIO
This ratio is also known as ‘Absolute Liquid Ratio’. This ratio expresses the relationship between cash and bank balance and current assets.
Formula:-
Cash Ratio = Cash & Bank Balance
Current Assets
Significance:-
This ratio revels very clearly whether a concern is liquid or not. In other words, it is the real measures of the liquidity or short-term solvency of the concern. The ideal cash ratio is 1:2.
If the cash ratio is equal to or more than the standard ratio, then the concern can be taken as liquid. On the other hand if the cash ratio is too low, the concern is considered as not liquid.
This ratio is also known as ‘Absolute Liquid Ratio’. This ratio expresses the relationship between cash and bank balance and current assets.
Formula:-
Cash Ratio = Cash & Bank Balance
Current Assets
Significance:-
This ratio revels very clearly whether a concern is liquid or not. In other words, it is the real measures of the liquidity or short-term solvency of the concern. The ideal cash ratio is 1:2.
If the cash ratio is equal to or more than the standard ratio, then the concern can be taken as liquid. On the other hand if the cash ratio is too low, the concern is considered as not liquid.