Sources and uses
What it measures¶
This check compares the cash a company can count on over the next twelve months (its sources) with the cash it has to pay out over the same time (its uses), and asks: do the sources cover the uses at least 1.2 times?
Rating agencies count, as sources, cash and short-term investments, unused committed credit lines and the coming year's cash from operations; as uses, debt falling due within the year, capital spending and payments to owners. The stored statements carry no line for unused credit lines or the timing of debt repayments, so the check reads:
- sources = cash + short-term investments + the latest year's operating cash flow (standing in for the coming year's);
- uses = short-term debt + capital expenditure + dividends.
Cash, operating cash flow and capital expenditure are required. A component the statements do not carry — no short-term investments line, no short-term debt, no dividend line — counts as nothing and is named beside the figure.
Why it is on the page¶
It is the agencies' direct test of whether a company could get through the next year without new money. Unlike most ratios it is judged on an absolute scale: S&P states that its liquidity assessment "is not relative to industry peers". A company whose sources fall short of its uses has to borrow, dispose of assets or raise equity within the year — which is why a reading below 1.0 also caps the band's overall word.
Thresholds, their source and the population they were fitted on¶
| Result | When |
|---|---|
| ✓ passed | sources ÷ uses is 1.2 or more ("adequate"; 1.5 reads strong, 2.0 exceptional) |
| ✕ failed | it is below 1.2 |
| ✕ failed and capped | it is below 1.0 — the band's overall word is held at Mixed at most |
| ○ not evaluable | cash, operating cash flow or capital expenditure is not stored |
| ○ not applicable | there are no uses of cash to cover |
- Source: S&P Global Ratings' liquidity descriptors; the 2.0 "exceptional" line is known from secondary summaries only.
- Fitted on: no statistical sample — the agency's published method.
- Evidence grade: practitioner convention.
- Basis: absolute.
A worked example¶
Honeywell International, fiscal year 2025 (statements stored on 25 October 2026): sources covered uses 1.96 times — passed, close to "exceptional".
Meta Platforms, the same year: 2.63 times, with the note short-term debt not stored beside the figure — the uses may be understated by that line.
What “No verdict” means here¶
The check is not evaluable when cash, operating cash flow or capital expenditure is missing for the latest year; it is not applicable when the company has no uses of cash at all to cover. Either way it leaves the area's count, with the reason named, and no cap is applied.
What the verdict is and is not¶
A pass says the last year's figures, used as a stand-in for the next year, covered the cash the company is committed to paying. It is not a forecast of next year's cash, it cannot see credit lines or repayment dates, and it is not an instruction to trade the shares.