Liquidity benchmark · 11 sectors
Cash Ratio by Industry: Sector Benchmarks
The cash ratio is the strictest liquidity test — it measures only cash and cash equivalents against current liabilities, with no credit given for receivables or inventory. A ratio below 1.0 is normal and expected in nearly every sector. Technology companies average 0.9–2.0; Utilities and REITs structurally hold near zero. Use the Cash Ratio Calculator to compute it for any ticker, or screen for companies above or below sector thresholds with the Cash Ratio Screener.
2024 data · 11 sectors
Cash Ratio Benchmarks by Sector
| Sector | Median Ratio | Typical Range | Notes |
|---|---|---|---|
| Technology | 1.40 | 0.9–2.0 | SaaS and cloud platforms accumulate large cash balances with minimal current liabilities relative to their size; hardware and semiconductor companies sit at the lower end on supply-chain payables |
| Healthcare | 1.60 | 0.8–2.5 | Biotech and early-stage pharma hold cash reserves for R&D burn with little debt due near-term; large pharma at 1.0–1.5; hospitals and device makers at 0.8–1.2 on higher current payables |
| Communication Services | 0.65 | 0.3–1.0 | Large-cap media and telecom hold moderate cash; streaming platforms higher at 0.7–1.0; legacy telco carriers lower at 0.3–0.5 on heavy capex-driven current liabilities |
| Consumer Discretionary | 0.25 | 0.1–0.4 | Retailers distribute cash aggressively through buybacks and dividends; auto OEMs operate with lean cash buffers relative to massive current liabilities; e-commerce platforms slightly higher |
| Consumer Staples | 0.15 | 0.05–0.25 | Highly predictable operating cash flow reduces the need to hold idle cash; companies leverage strong credit ratings to access facilities on demand; near-zero cash ratios are structurally normal here |
| Industrials | 0.25 | 0.1–0.4 | Capex-intensive manufacturers and defense contractors maintain modest cash positions; services-oriented industrials slightly higher; cash is deployed into working capital and equipment rather than held idle |
| Energy | 0.30 | 0.1–0.5 | Integrated oil majors hold more cash as a buffer against commodity price swings; E&P companies operate lean and rely on revolving credit; midstream and pipeline operators lowest on stable, contracted revenues |
| Materials | 0.22 | 0.1–0.35 | Commodity price cycles drive wide variance in cash positions; mining companies hold more at cycle peaks; chemical companies run lean; specialty materials closer to 0.3 on higher margins |
| Utilities | 0.08 | 0.02–0.15 | Regulated model with predictable rate-base returns means utilities maintain near-zero free cash; short-term debt is continuously rolled; a cash ratio below 0.1 is completely normal and expected here |
| Real Estate (REITs) | 0.08 | 0.02–0.15 | REITs are required by law to distribute at least 90% of taxable income to shareholders, leaving minimal retained cash; cash ratio near zero is structurally mandated, not a distress signal |
| Financials | N/A | N/A | Cash ratio is not a standard liquidity measure for banks and insurers — their balance sheets are fundamentally different. Use Tier 1 capital ratios, liquidity coverage ratios (LCR), and net stable funding ratios (NSFR) instead |
What Is a Good Cash Ratio?
The cash ratio is the most conservative of the three main liquidity ratios — more restrictive than the quick ratio and the current ratio. It counts only cash and cash equivalents in the numerator, excluding receivables, inventory, and all other current assets. The question it answers: can this company pay all its current liabilities today, from existing cash, without collecting a single invoice or selling a single unit?
Above 1.0 — Exceptional cash position. The company holds more cash than its entire current liabilities balance. This is rare outside of Technology and Healthcare, and often indicates either a capital-light business model or a management team that has elected to hold a large cash war chest. Very high cash ratios (above 2.0) sometimes reflect excess idle capital and may prompt investor pressure for buybacks or acquisitions.
0.2 to 1.0 — Normal for most operating businesses. Technology and Healthcare companies commonly operate in this range. A cash ratio of 0.3–0.5 means the company holds enough cash to cover 30–50% of its current liabilities directly, with the rest managed through normal business operations and credit lines.
Below 0.2 — Normal for asset-heavy and regulated sectors. Consumer Staples, Industrials, Utilities, and REITs routinely sit below 0.2. These businesses generate predictable operating cash flow or operate under regulated return frameworks that make holding large cash balances unnecessary and capital-inefficient.
Always compare a company's cash ratio to its sector benchmark above, not to a universal threshold. A Utility at 0.05 is operating normally; a Software company at 0.05 deserves investigation.
How to Use This Data
1. Use cash ratio as a stress test, not a primary screen
The cash ratio tests the extreme case: can the company survive if all revenue suddenly stops? It is most useful as a stress test for companies in cyclical sectors (Energy, Materials) or early-stage businesses (biotech, pre-revenue SaaS) where cash runways matter. For established operating businesses, pair it with the cash ratio calculator and the quick ratio to get a complete liquidity picture.
2. Watch for sector-inappropriate cash ratios
A Technology company with a cash ratio below 0.1 is unusual — it may be burning cash, aggressively buying back stock, or over-leveraged. A Consumer Staples company with a cash ratio above 0.5 is also unusual — it may signal that management is hoarding cash rather than returning it to shareholders or reinvesting. Sector benchmarks reveal when a company is an outlier, in either direction. Use the cash ratio screener to find outliers across the market.
3. Compare all three liquidity ratios together
The gap between the current ratio, quick ratio, and cash ratio tells a story about where a company's liquidity lives. A large gap between the current ratio and quick ratio means inventory is a big component of liquidity. A large gap between the quick ratio and cash ratio means receivables are carrying the liquidity load. Use the quick ratio benchmarks and current ratio benchmarks alongside this page for the full picture.
Common questions
Cash ratio by industry — answered directly.
What is a good cash ratio by industry?
The cash ratio measures only cash and cash equivalents against current liabilities — it is the most conservative liquidity test. A ratio below 1.0 is normal and expected in virtually every sector because companies fund near-term obligations through operating cash flow and credit facilities, not idle cash. Technology and Healthcare companies often run above 0.8 due to large cash reserves; Consumer Staples and Utilities routinely sit below 0.1. Always compare to the sector median in the table above rather than applying a universal threshold.
How is the cash ratio different from the current ratio and quick ratio?
All three measure short-term liquidity but use progressively stricter definitions of 'liquid assets.' The current ratio counts all current assets including inventory and prepaid expenses. The quick ratio removes inventory and prepaid expenses, leaving cash, investments, and receivables. The cash ratio strips out receivables too — it counts only cash and cash equivalents. This makes the cash ratio the most conservative of the three: it tells you whether the company could pay its current liabilities instantly, without waiting for customers to pay invoices or inventory to sell. Most companies fail this extreme test by design.
How is the cash ratio calculated?
Cash ratio = (Cash + Cash Equivalents) / Current Liabilities. All inputs come directly from the balance sheet. Cash equivalents include treasury bills, money market funds, and other instruments that can be converted to cash within 90 days. For example, a company with $150M in cash and cash equivalents and $500M in current liabilities has a cash ratio of 0.30. This means it could cover 30% of current liabilities immediately from its cash on hand — the remaining 70% would come from operating cash flow, maturing receivables, or credit facilities over the course of normal business operations.
Why do REITs and Utilities have such low cash ratios?
REITs are legally required to distribute at least 90% of their taxable income to shareholders to maintain their REIT status and avoid corporate income tax. This structural requirement means REITs retain almost no cash — their cash ratio near zero is mandated by tax law, not a sign of poor liquidity management. Utilities operate under a similar logic: regulated revenue streams are highly predictable, investment-grade credit ratings provide cheap access to capital markets, and holding idle cash would represent a poor allocation of shareholder capital. Both sectors compensate with excellent access to debt financing at low rates.
Related Tools & Resources
Cash Ratio Calculator
Compute (cash + cash equivalents) ÷ current liabilities for any ticker and benchmark against the sector median above.
Cash Ratio Screener
Screen for companies above or below cash ratio thresholds across all sectors to find outliers with exceptional or dangerously low cash positions.
Current Ratio by Industry
The broadest liquidity measure — compare it to the cash ratio to see how much of a company's liquidity is tied up in inventory and receivables.
Quick Ratio by Industry
The middle-ground liquidity test that strips inventory but retains receivables — use alongside the cash ratio to triangulate a company's true liquidity position.
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