Cash Ratio and Quick Ratio are two of the most commonly used financial ratios for assessing a company’s liquidity. The Cash Ratio measures the proportion of assets that are available as cash or close to cash, while the Quick Ratio measures assets that are able to be converted into cash in the short term.

The Cash Ratio is calculated by dividing a company’s total cash and cash equivalents by its current liabilities. This ratio provides an indication of the company’s ability to meet its short-term debt obligations with its liquid assets. A high ratio indicates the company has plenty of liquidity, while a low ratio signals potential risk.

On the other hand, the Quick Ratio measures a company’s ability to pay off its current liabilities using only its most liquid assets. To calculate, take the company’s total cash, cash equivalents, marketable securities, and accounts receivable, then divide it by current liabilities, excluding any stock or inventory. This will give you a good indicator of how quickly the company can access funds if necessary. A higher quick ratio demonstrates that the company has enough accessible funds for unexpected expenses and emergency debts.