kassasuhde

Kassasuhde, commonly translated as the cash ratio, is a conservative liquidity metric used to assess whether a company can meet its short-term obligations using only its most liquid assets—cash and cash equivalents. It complements broader liquidity measures by focusing on the ability to cover current liabilities with readily available funds.

Calculation and components: Kassasuhde = (cash and cash equivalents) / current liabilities. The numerator typically includes cash, bank deposits, and other near-cash assets that can be quickly converted to cash. The denominator comprises all current liabilities due within one year.

Interpretation: A higher kassasuhde indicates a stronger ability to pay short-term debts from cash reserves alone. A ratio of 1.0 implies that cash and cash equivalents cover current liabilities entirely, while a ratio below 1 suggests dependence on other sources of liquidity. Values vary by industry, company size, and country; they are generally lower than for assets held in working capital and may be influenced by seasonal cash flows or corporate cash management practices.

Applications and limitations: The kassasuhde is used in liquidity risk assessment, credit analysis, and regulatory reporting as a conservative gauge of immediate solvency. However, it ignores receivables, inventories, and potential lines of credit, and can be affected by timing of cash flows or one-off transactions. It should be interpreted together with other liquidity ratios, such as the current ratio and quick ratio, to form a fuller picture of a company’s financial health.