What is a 1.6 cash ratio? (2024)

What is a 1.6 cash ratio?

A 1.6:1 ratio means the company has enough quick assets to cover current liabilities.

Is a quick ratio of 1.6 good?

Results. Indicates the number dollars of quick assets available to pay each dollar of current liabilities. Generally, a Quick Ratio of 1.0 or greater is considered adequate to ensure a company's ability to pay its current obligations.

What does a current ratio of 1.6 mean?

As a general rule, a current ratio below 1.00 could indicate that a company might struggle to meet its short-term obligations, whereas ratios of above 1.00 might indicate a company is able to pay its current debts as they come due.

What if cash ratio is more than 1?

If a company's cash ratio is greater than 1, the company has more cash and cash equivalents than current liabilities. In this situation, the company has the ability to cover all short-term debt and still have cash remaining.

What is considered a good cash ratio?

There is no ideal figure, but a cash ratio is considered good if it is between 0.5 and 1. For example, a company with $200,000 in cash and cash equivalents, and $150,000 in liabilities, will have a 1.33 cash ratio.

What does a quick ratio of 1.7 mean?

Cash and equivalents ($26,000) + Accounts receivable ($4,500) + Marketable securities ($5,600) / Current liabilities ($21,000) = 1.7. A quick ratio of 1.7 means Acme Widgets can pay off its current liabilities with its quick assets and still have a little remaining.

What does a quick ratio of 1.5 mean?

For instance, a quick ratio of 1.5 indicates that a company has $1.50 of liquid assets available to cover each $1 of its current liabilities. While such numbers-based ratios offer insight into the viability and certain aspects of a business, they may not provide a complete picture of the overall health of the business.

How to interpret cash ratio?

The cash ratio indicates to creditors, analysts, and investors the percentage of a company's current liabilities that cash and cash equivalents will cover. A ratio above 1 means that a company will be able to pay off its current liabilities with cash and cash equivalents, and have funds left over.

How to calculate cash ratio?

What's a good quick ratio?

Generally speaking, a good quick ratio is anything above 1 or 1:1. A ratio of 1:1 would mean the company has the same amount of liquid assets as current liabilities. A higher ratio indicates the company could pay off current liabilities several times over.

Do you want a high cash ratio?

Ideally, you need a higher cash ratio than your short-term liabilities, but you may have trouble making payments on time if you're too far below the amount you owe. If your cash ratio is dangerously low, you should consider ways to increase it.

What is a bad cash flow ratio?

An operating cash flow ratio of less than one indicates the opposite—the firm has not generated enough cash to cover its current liabilities. To investors and analysts, a low ratio could mean that the firm needs more capital. However, there could be many interpretations, not all of which point to poor financial health.

Is 0.2 a good cash ratio?

Is 0.2 a good cash ratio? A cash ratio of 0.2 suggests that a company has 20% of its current liabilities covered by cash and cash equivalents. While this may not be considered high, the adequacy of the ratio depends on various factors such as industry norms, business model, and specific circ*mstances of the company.

What is the common size cash ratio?

Common Size Analysis, also known as Vertical Analysis, is a method of financial statement analysis that compares all items on the statement against one pre-determined item that acts as a base against which to evaluate all others. The formula for calculating this ratio is (Comparison Amount/Base Amount) * 100.

What does a current ratio of 1.2 mean?

A current ratio of 1.2 indicates that the current assets are 1.2 times the current liabilities. The current assets are greater than the current liabilities, which indicates the good liquidity position of the company.

Is 1.5 a good quick ratio?

While the current ratio is 2.5, the quick ratio for Company ABC is only 1.5. This is still considered to be a good ratio. Any quick ratio over 1 means that the company holds enough in its accounts to pay off all liabilities within 90 days.

What does a quick ratio of 1.3 mean?

Also, Pet Palace LLC's quick ratio of 1.3 also shows that its quick assets are greater than the liabilities, meaning the bank is likely to approve the loan because of the business's ability to pay off its current liabilities and still generate profit.

Is 1.05 a good quick ratio?

As indicated, a ratio of 1 or higher is considered a normal ratio. This ratio measures the amount in dollars available to pay each dollar in debt. A ratio of 1.05 means that the company has 5 cents more for every euro of debt that it accrues. Investors and analysts see this as a healthy situation.

What is an example of 1.5 ratio?

The ratio 1.5:1, which is read "1.5 to 1" means that the length is 1.5 times the width. So, for example if your paper is 2 inches in width then the length is 1.5 × 2 = 3 inches.

Is a quick ratio of 1.1 good?

The acid-test ratio, also called the quick ratio, is a metric used to see if a company is positioned to sell assets within 90 days to meet immediate expenses. In general, analysts believe if the ratio is more than 1.0, a business can pay its immediate expenses. If it is less than 1.0, it cannot.

Is 2.5 a good quick ratio?

What is a good quick ratio for a company? A quick ratio above one is excellent because it shows an even match between your assets and liabilities.

What is the difference between quick ratio and cash ratio?

The cash ratio looks at only the cash on hand divided by CL, while the quick ratio adds in cash equivalents (like money market holdings) as well as marketable securities and accounts receivable. The current ratio includes all current assets.

How to calculate quick ratio?

To find your company's quick ratio, first add together your cash, accounts receivable, and marketable securities to find your quick assets. Add together your accounts payable and short-term debt to find current liabilities. Then, divide your quick assets by current liabilities to find your quick ratio.

What is another name for the cash ratio?

The cash asset ratio is the current value of marketable securities and cash, divided by the company's current liabilities. Also known as the cash ratio, the cash asset ratio compares the amount of highly liquid assets (such as cash and marketable securities) to the amount of short-term liabilities.

What is the conclusion of the cash ratio?

Using the cash ratio formula, you can tell how capable a company is of paying off its short-term debts using the cash it has on hand. A higher cash ratio indicates a stronger ability to meet short-term obligations, which can be seen as a positive sign of financial health.