Which ratio would you use to assess a company's capability to meet its short-term liabilities with its available cash?

The correct choice to assess a company's capability to meet its short-term liabilities with its available cash is the current ratio. This ratio provides insight into a company's ability to satisfy its short-term obligations using its current assets. The current ratio is calculated by dividing total current assets by total current liabilities. This gives a broad view of the company's liquidity position.

However, while assessing the ability to meet obligations specifically with available cash, the current ratio may offer a less precise picture because it includes inventory and other current assets that may not be quickly converted into cash. For a more immediate perspective, one might consider the quick ratio or acid-test ratio, which focus on more liquid assets.

The quick ratio, for example, excludes inventory from current assets, providing a clearer view of how quickly a company can meet short-term liabilities using only its most liquid assets. The acid-test ratio serves a similar purpose but is often synonymous with the quick ratio, reiterating the importance of liquid assets over total current assets. The debt ratio, on the other hand, measures the extent of a company's leverage rather than its short-term liquidity.

In summary, while the current ratio is valuable for a general understanding of liquidity, considering the quick and acid-test ratios would allow a more precise assessment of an