Health Care Finance 1 Practice Test 2025 – 400 Free Practice Questions to Pass the Exam

The days-cash-on-hand ratio and the current ratio are both critical measures of liquidity, providing insights into an organization's ability to meet its short-term obligations.

The current ratio evaluates a company's ability to cover its current liabilities with its current assets, which includes cash, accounts receivable, and inventory. A higher current ratio indicates that a company is in a better position to pay off its short-term debts, signaling financial health and liquidity.

The days-cash-on-hand ratio complements this analysis by estimating how long an organization can sustain its operations with its available cash resources before needing to generate further cash flow or secure additional funding. This measurement is particularly crucial for health care organizations, which often face fluctuating revenues and expenses.

Together, these two ratios provide a more comprehensive view of liquidity, highlighting an organization’s capacity to respond to immediate financial pressures.