About the Cash Ratio Calculator
This cash ratio calculator measures the strictest form of liquidity: how much of a company’s current liabilities could be paid immediately from cash, cash equivalents and marketable securities, without collecting receivables or selling inventory. It also returns the quick ratio and the defensive interval ratio (DIR), which tells you how many days the business could keep paying its cash operating expenses from liquid assets alone.
Credit analysts, lenders, treasurers and investors use the cash ratio to stress-test liquidity, especially for companies with uncertain sales or tight credit markets. The defensive interval is popular with small business owners because a figure in days ("we have 90 days of runway") is easier to plan with than a ratio.
Enter balances from the same balance sheet date. For the defensive interval, enter annual operating expenses including cost of goods sold, and the non-cash items such as depreciation and amortization that are included in them; the calculator divides the cash portion by 365 to get daily spending. The cash ratio is also called the absolute liquidity ratio.
With the default inputs, the cash ratio is 0.6 x. Change any value above to recalculate instantly.
How to use the cash ratio calculator
- 1Enter cash and cash equivalents from the balance sheet.
- 2Add marketable securities and net accounts receivable.
- 3Enter total current liabilities.
- 4Enter annual operating expenses and the non-cash portion for the defensive interval.
- 5Compare the cash ratio and days of coverage with peers or loan covenants.
Formula and method
The cash ratio is the most conservative liquidity ratio: it counts only cash, cash equivalents and readily saleable securities, ignoring receivables, inventory and prepaid items. A value of 1.0 means the company could settle every current liability today from cash on hand; most healthy operating companies run well below that because cash sitting idle earns little.
The defensive interval ratio looks at liquidity from the spending side. It divides the defensive assets (cash, securities and receivables) by average daily cash operating expenses, which strips out depreciation and other non-cash charges. The answer is the number of days the business could continue operating if revenue stopped. The calculator also shows a cash-only version that excludes receivables.
- Cash
- Cash on hand and cash equivalents (maturity of 3 months or less)
- Marketable securities
- Liquid short-term investments
- Current liabilities
- Obligations due within 12 months
Worked examples
Typical small manufacturer
Cash and securities of $120,000 cover 0.6x of $200,000 in current liabilities. Cash spending is ($900,000 − $60,000) ÷ 365 = $2,301 a day, so $210,000 of defensive assets last about 91 days.
Cash-rich software company
With $750,000 of cash and securities against $400,000 of liabilities, the cash ratio is 1.88x. Daily cash spending of $4,932 means defensive assets cover roughly 172 days.
Thinly capitalised contractor
Only $15,000 of cash backs $150,000 of short-term bills, a 0.1x cash ratio. Including receivables the business could fund about 35 days of operations, so it depends on steady collections or a credit line.
Frequently asked questions
What is a good cash ratio?+
There is no universal target, but many analysts consider 0.5 to 1.0 comfortable. Ratios below 0.2 suggest heavy reliance on collections or borrowing, while ratios well above 1 may indicate the company is hoarding cash that could earn a better return.
How is the cash ratio different from the quick ratio?+
The quick ratio adds accounts receivable to cash and marketable securities. The cash ratio excludes receivables because customers may pay late or not at all, so it is the strictest of the three common liquidity ratios.
What is the defensive interval ratio?+
It is the number of days a company can pay its cash operating expenses using only cash, marketable securities and receivables — without any new revenue. It is calculated as defensive assets divided by daily cash expenses.
What counts as a cash equivalent?+
Highly liquid investments with original maturities of three months or less, such as Treasury bills, money market funds and commercial paper, that carry an insignificant risk of changes in value.
Why might lenders look at the cash ratio?+
It shows whether a borrower could meet obligations in a downturn when receivables slow and inventory is hard to sell. Lenders sometimes set minimum liquidity covenants based on cash balances or cash ratios.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.