1The ratio of the liquid assets of a company to its current liabilities.
- The precautionary motive for cash holdings appears to explain the increase in the average cash ratio.
- The value of cash ratio is within the recommended range.
- If neither inventories nor receivables are liquid, the cash ratio may be the better indicator of solvency, because it is the most conservative solvency measure.
1.1The ratio of cash to deposits in a bank (for which minimum values are generally set officially).
- Banks like to keep the cash ratio higher than the minimum for various understandable reasons.
- It was also important to make the statutory cash ratio deposit scheme transparent, so that the Bank was accountable to the institutions placing deposits with it.
- Minimum cash ratios were stipulated for the banks in the mid-1970s on the basis of their total deposit liabilities, but since such cash ratios were usually lower than those voluntarily maintained by the banks, they proved less effective as a restraint on their credit operations
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