What Is the Cash Ratio? The cash ratio is a measurement of a company’s liquidity. It specifically calculates the ratio of a company’s total cash and cash equivalents to its current liabilities. The metric evaluates company’s ability to repay its short-term debt with cash or near-cash resources, such as easily marketable securities. This information is
What Is a Cash Refund Annuity? A cash refund annuity returns to a beneficiary any sum left over should the person who purchased the annuity—called the annuitant—die before breaking even on what they paid in premiums. Such a provision is typically included as a rider on a life annuity (also known as a “pure life
What Are Cash Reserves? Cash reserves refer to the money a company or individual keeps on hand to meet short-term and emergency funding needs. Short-term investments that enable customers to quickly gain access to their money, often in exchange for a lower rate of return, can also be called cash reserves. Examples include money market funds
What Is the Cash Return On Assets Ratio? The cash return on assets (cash ROA) ratio is used to benchmark a business’s performance with other businesses in the same industry. It is an efficiency ratio that rates actual cash flows to company assets without being affected by income recognition or income measurements. The ratio can
What Are Cash-Settled Options? A cash-settled option is a type of option for which actual physical delivery of the underlying asset or security is not required. The settlement results in a cash payment, instead of settling in stocks, bonds, commodities, or any other asset. This type of option avoids the high costs of transport or
What Is Cash Surrender Value? Cash surrender value is money an insurance company pays to a policyholder or an annuity contract owner if their policy is voluntarily terminated before maturity or an insured event occurs. This cash value is the savings component of most permanent life insurance policies, particularly whole life insurance policies. It is also
What Is a Cash Transaction? A cash transaction is a transaction where there is an immediate payment of cash for the purchase of an asset. It differs from other types of transactions that involve delayed delivery of the purchased item, or delayed payment for the item, such as forward contracts, futures contracts, credit transactions, and
What Is a Cash Trigger? A cash trigger is a condition that triggers an investor to make a trade or take a specific action, such as buying or selling a financial product such as a stock, option, futures contract, bond, or currency. Self-imposed cash triggers are most common among retail investors. They include deciding to
What Is the Cash Value Accumulation Test (CVAT)? The cash value accumulation test (CVAT) is a test for determining whether a financial product can be taxed as an insurance contract rather than as an investment. The cash value accumulation test is used to make sure that the cash value of the insurance policy does not exceed the present
What Is Cash Value Life Insurance? Cash value life insurance is a form of permanent life insurance—lasting for the lifetime of the holder—that features a cash value savings component. The policyholder can use the cash value for many purposes, such as a source of loans or cash or to pay policy premiums. Key Takeaways Permanent life
