Operating Cash Ratio

The operating cash ratio, a.k.a. operating cash flow ratio, is a liquidity ratio measuring the frequency of operations to pay the current liabilities.   The higher the value, the more lucrative the operation.  It is one of the top three most complicated business ratios formula due to conversion of the accrual based profit and loss statement to cash basis.

Liquidity Ratios

Liquidity Ratios

Liquidity ratios are a group of ratios used to measure the ability of a business operation to meets its current obligations. Liquidity ratios are similar to the initial medical tests a patient receives at a doctor’s visit. Doctors take blood pressure, temperature, and pulse rate. The doctor wants assurance that the primary indicators of health are good. Liquidity ratios are exactly the same. The user wants to know that the basic measurements of a business indicate good health today.

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