Cash to debt ratio

What is Cash to debt ratio?

Cash to debt ratio counts as Cash and Short Term Investments divided by Total debt. It is not calculated for banks and varias based on how a company’s balance sheet is prepared and the sector or industry it is in.

Formula:

Cash and Short Term Investments / Total debt

What does Cash to debt ratio mean?

This ratio indicates a general financial condition of a company. A high ratio indicates a company can pay off its debt and remain solvent into the foreseeable future. In addition, it also means that if necessary, the company can take on a larger amount of debt because it has the cash to support that.

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