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Cash
This shows
the proportion of total cash and near-cash assets to shareholders’
funds.
Near-cash
assets are defined as current assets of a liquid nature which
can readily be converted to cash, for example cash on overnight
or short-term deposit, treasury bills or CD’s (Certificates
of Deposit).
Price
sensitive items, such as marketable securities, are excluded
from near-cash assets for two reasons. First, the market price
itself can fluctuate, and the balance sheet valuation may
no longer apply. Second, securities may or may not be marketable
at the actual market price. A company’s liquid cash position
should arguably be assessed with this risk factor removed.
Calculation:
CASH + NEAR-CASH ASSETS
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X 100 = CASH (%)
SHAREHOLDERS’ FUNDS
To enable the impact of intangible
assets to be considered when assessing the company’s cash position, the cash percentage
is calculated both before and after deducting intangibles from shareholders’ funds.
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