Question

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Explanation:

The cash ratio is a liquidity ratio that measures a company's ability to pay off its current liabilities with cash and cash equivalents. The formula for the cash ratio is (Cash + Cash equivalents) divided by Total current liabilities. This is because the cash ratio focuses on the most liquid assets (cash and cash equivalents) available to cover short - term obligations (current liabilities). Other options represent different financial ratios: average merchandise inventory/net sales revenue is not a standard ratio, (Cash + Accounts receivable, net)/Total current liabilities is the quick ratio, cost of goods sold/average merchandise inventory is the inventory turnover ratio, gross profit/net sales revenue is the gross profit margin, market price per share/earnings per share is the price - earnings ratio, (Net Income + Income tax expense + Interest expense)/Interest expense is the times - interest - earned ratio, (Net income - Preferred dividends)/Average common stockholder’s equity is the return on common stockholders' equity, (Net income - Preferred dividends)/Weighted average number of common shares outstanding is earnings per share, total current assets/total current liabilities is the current ratio, total equity/total liabilities and total liabilities/total equity are leverage ratios.

Answer:

(Cash + Cash equivalents) ÷ Total current liabilities