Finance Formulas / July 19, 2018 / Alia Marquez
You can use the bond price formula to determine the value of a bond. While it involves some number crunching, it’s a fairly straightforward process because future cash flows to the investor (the bondholder) are always specified ahead of time. The issuer has to meet the interest and principal payments as they come due, or the bonds will go into default – something that can have devastating consequences for the issuer and, in the case of corporate bonds, its shareholders.
The cash ratio is most commonly used as a measure of company's liquidity. The metric calculates a company's ability to pay current liabilities using only cash and cash equivalents on hand. If the company is forced to pay all current liabilities immediately, this metric shows the company's ability to do so without having to sell or liquidate other assets.
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