Cash and Cash Equivalents & Current Financial Investments to Revenue Ratio

The coefficient Cash and Cash Equivalents & Current Financial Investments to Revenue determines the sufficiency of cash at the enterprise. Cash flows as well as the balance of funds are very important for the analysis.

Alternative names of the indicator:

  • (CCЕ&CFinI) / R
  • Cash and Cash Equivalents & Current Financial Investments to Revenue

What Does the Indicator of Cash and Cash Equivalents & Current Financial Investments to Revenue Show?

The indicator shows the sufficiency or redundancy of the company’s cash funds, which is determined by the impact of sales volume. Comparing cash, experts also take into consideration money on bank accounts that can be withdrawn within a few days. Some economists include to this category all highly liquid securities that can be converted into money within a month.

Formula of the Indicator Cash and Cash Equivalents & Current Financial Investments to Revenue

The figure is determined as follows:

(CCE & CFinI) / R = (Cash surplus + Highly liquid securities) / Sales volume

Normative Value of the Indicator Cash and Cash Equivalents & Current Financial Investments to Revenue

The indicator should be investigated in comparison with the practice of the best companies and the average industry value. In fact, it is a rare situation when an enterprise preserves the amount of money that exceeds the volume of annual sales on its current account. Cash should be sufficient only to repay the urgent debt. The rest of the funds should work actively. That’s why not a low, but a high value of this indicator is critical for the company.