The formula for calculating the cash ratio is calculated is ________.
A)(Cash)/ Total liabilities
B)(Cash + Cash equivalents)/ Total current liabilities
C)(Cash + Cash equivalents)/ Total assets
D)(Cash equivalents)/ Total current liabilities

Question

Quizplus · Accepted Answer

The cash ratio is calculated by dividing the sum of cash and cash equivalents by the total current liabilities. This ratio measures a company's ability to pay off its current liabilities using only its most liquid assets (cash and cash equivalents). Option A and C are incorrect because they do not take into account only the current liabilities, whereas option D excludes cash in the formula.

The Formula for Calculating the Cash Ratio Is Calculated Is