**Definition**: What is Cash Ratio?

**Cash ratio** is the liquidity ratio which is used to measure the ability of the company to pay off the current obligation of the company with its cash and cash equivalent.

As compared to the quick ratio or current ratio, cash ratio is more restrictive because in this ratio no other current assets can be used to pay off current debt-only cash.

Cash ratio shows how well the company can pay off its current liabilities with cash only.

Cash ratio shows the cash or cash equivalent to the percentage of the current liabilities of the company. We are also sharing **Cash Ratio Formula **with you.

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