CASH RATIO Definition

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CASH RATIO is a refinement to the QUICK RATIO. It is the ratio of cash and marketable securities to current liabilities. The CASH RATIO indicates the extent to which liabilities could be liquidated immediately. Sometimes called LIQUIDITY RATIO.

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COMPARE / COMPARISON is an audit procedure where an auditor observes similarities and differences between items such as an account from one year to the next.

DISCOUNTED EARNINGS determines the value of a business based upon the present value of projected future earnings, discounted by the required rate of return (capitalization rate). Usually, the question is how well earnings are projected.

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