Understanding Cash Ratio: Evaluating Liquidity and Financial Health of Companies

What is the primary focus of liquidity ratios?

• To evaluate a company's ability to pay short-term obligations

• To assess long-term profitability

• To analyze investment opportunities

• To determine the market value of a company

Which of the following is considered a cash equivalent?

• Marketable securities

• Inventory

• Accounts receivable

• Real estate

How is the cash ratio calculated?

• By dividing current assets by current liabilities

• By dividing total assets by total liabilities

• By dividing cash and cash equivalents by current liabilities

• By dividing net income by total revenue

Which company has a better cash ratio according to the video?

• Both have the same ratio

• Company B

• Neither company has a good ratio

• Company A

What does a higher cash ratio indicate about a company's cash management?

• Potential inefficiency in cash utilization

• Efficient use of cash

• High profitability

• Strong market position

What is a potential downside of having a cash ratio significantly higher than the industry norm?

• It indicates high profitability

• It suggests the company is investing in many projects

• It may show inefficiency in cash utilization

• It reflects a strong market position

What future topic is hinted at in the video?

• How to increase cash ratio

• How to calculate net profit margin

• How to improve stock turnover

• How many days a company can operate using its cash balance