One of the main concerns of companies is entering into a possible suspension of payments. This is often due to poor planning and, above all, because treasurers have not been able to predict that this situation was going to occur in the daily activity of a company.
Luckily, accounting and mathematics provide us with formulas to detect problematic financial situations regarding the management of liquidity in a company. And one of the most relevant indicators is the cash ratio.
What is the cash ratio?
The cash ratio is a financial measure that measures a company’s ability to pay its short-term debts with its liquid assets. It is a useful tool for financial analysts and investors who want to evaluate the solvency and financial stability of a company.
What is the cash ratio used for?
The cash ratio is used to determine the extent to which a company can meet its short-term financial obligations, taking into account its available liquid assets, such as cash and cash equivalents. It is a useful tool for investors and creditors to evaluate the financial health of a company and make informed investment or financing decisions.