Cash to Asset Ratio
factor.formula
Cash-to-Total Assets Ratio:
Average Total Assets:
This formula calculates the ratio of a company's cash and cash equivalents to its total assets. Where:
- :
Refers to the total amount of cash and cash equivalents in the last 12 months (Trailing Twelve Months, TTM). This data is usually obtained from the company's financial statements, reflecting the assets held by the company during the reporting period that can be used for payment immediately, including cash, bank deposits, and short-term investments that can be converted into cash in the short term.
- :
Refers to the average total assets owned by the company during the reporting period. In order to more accurately reflect the asset level throughout the reporting period, the average of the total assets at the beginning and end of the period is used as a representative.
- :
Refers to total assets at the beginning of the reporting period.
- :
Refers to total assets at the end of the reporting period.
factor.explanation
The cash-to-asset ratio is an important indicator of a company's financial liquidity. A higher ratio generally indicates that the company has stronger short-term debt repayment ability and financial flexibility, and is better able to cope with challenges during economic downturns or market fluctuations. However, excessive cash holdings may also mean that the company has failed to effectively use its capital for investment and expansion, thereby reducing the return on capital. High-risk companies with a higher correlation between this factor and cash flow and total demand shocks may tend to hold more precautionary cash reserves, which reflects the positive correlation between expected stock returns and cash holdings. Therefore, this factor can be used as an important reference for measuring a company's risk appetite and financial status in quantitative investment.