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Tuesday, May 3, 2011

Cash Asset Ratio Formula & Example

Definition: Cash Asset Ratio (CAR) is used to measure a firm's ability to pay its short-term obligations by comparing the firm's cash reserves and liabilities. It is also known as Cash Ratio. However, this ratio ignores the timing of cash received and paid.

Formula:
Cash Asset Ratio = (Total cash + Total marketable securities) / Total short-term liabilities
Or,
CAR = (Cash Equivalents + Cash) /

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