DOOMSDAY RATIO Definition

Bookmark and Share

DOOMSDAY RATIO is related to the quick (acid test) ratio in that it is a conservative approach to debt coverage. The doomsday ratio only considers the cash on hand when evaluating if an entity can cover their current liabilities. The approach is that if the business were to go bankrupt today, would the business have enough cash on hand to cover current debts. The ratio is considered a good indicator of the cash cushion of safety. It may spot cash shortages, thereby assisting in avoiding a credit crisis. It is calculated: Cash divided by Current Liabilities.

Learn new Accounting Terms

MATERIALITY is the importance of information or an event that influences a companys price of stock.

MANAGERIAL ACCOUNTING is a system using financial accounting records as basic data to enable better business decisions in the areas of planning and control.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.