The concept of treasury ratio makes it possible to measure the capacity of a company to meet the payment of debts that expire in the short term. In some way it shows the ability of a company to pay its debts in less than one year with the available and the debts in its favor.
Both the cash ratio and the solvency ratio They are responsible for showing the level of aptitude of a company to pay its debts, but there is a differentiating piece between the two. While the meaning of the treasury ratio only considers short-term debts and compares them with the company's resources that are liquid or that can be in a short period of time. Therefore, it is responsible for measuring the solvency más inmediata.
For its part, the solvency ratio compares all the assets of the company with the liabilities, showing the proportion that all its assets and rights imply against its obligations and debts. It is a meter of solvency in general, without distinctions of short or long-term debts, or between assets that are liquid or not.
How is the cash ratio calculated?
The formula to calculate the cash ratio is as follows:
Cash ratio = Available + Achievable / Current liabilities.
All these concepts are present in the situation balance of the company and each term represents the following:
- Available: the money, the company's liquid.
- Realizable: assets and rights that can be quickly converted into money, as well as assets debtors, clients and short-term financial investments.
- Current liabilities: obligations and debts that are due in the short term.
So as not to have problems treasury the value of the ratio must be around 1. This implies that a normal situation occurs when the relationship between the possibility of liquidity-available and certain achievable, and the most approximate maturities is similar to 1.