This ratio calculates the amount of cash or near cash you have compared to your net worth. During an emergency, you need to be able to convert your assets into cash for urgent matters like a medical condition that requires immediate hospitalisation.So it is advisable that you maintain some of your assets in liquid form such as the bank savings, current account and fixed deposits.
Liquid Assets To Net Worth = Cash / Near Cash divided by Net Worth
A minimum of about 15% will be sufficient for this purpose. Too much liquidity is not wise and the bank’s interest payable is below inflation levels.
