Financial metric · Debt and liquidity
Cash to Short-Term Debt
Whether the cash on hand covers the interest-bearing debt due within a year. It is the most direct check on whether a company could face a funding squeeze soon.
How to calculate it
Cash to short-term debt = (cash and equivalents + short-term investments) ÷ short-term interest-bearing debtShort-term debt = short-term borrowings + commercial paper + current portion of long-term debtHow to read it
- Above 1 means the company could repay this year's maturities without new borrowing. Well below 1 means it depends on refinancing, which becomes risky when credit markets tighten.
- Add undrawn committed credit lines. U.S. companies disclose their revolving credit facilities in the liquidity section of MD&A, and an undrawn revolver can cover maturities just as cash can.
- Operating cash flow matters too: a low ratio is less worrying if steady cash comes in every quarter.
Common pitfalls
- Part of the cash may be restricted or held abroad. Restricted cash is disclosed separately; cash held by foreign subsidiaries may face costs or limits to bring home.
- Credit lines can come with covenants. If the company breaches them, the lender can refuse to fund exactly when the money is needed.
- Large maturities just after the 12-month window will not show up here. Read the debt maturity schedule in the debt note.
Where to find it in a 10-K
Balance sheet cash and short-term borrowings; the debt note's maturity table; and 'Liquidity and Capital Resources' in MD&A, which describes credit facilities, commercial paper programs and upcoming maturities.
U.S. vs. China reporting
In China this ratio became a headline metric through regulators' 'three red lines' for property developers. A-share companies also hold restricted cash for bank acceptance bills, which can be large. U.S. companies rely more on bond markets and committed revolving credit facilities, so undrawn capacity is a bigger part of the picture.