Which financial ratio evaluates a company’s capability to cover short-term liabilities using current assets?

Explanation

• Current Ratio formula: $text{Current Ratio} = frac{text{Current Assets}}{text{Current Liabilities}}$.
• It measures general short-term liquidity, including inventory and prepaid expenses.
• A Current Ratio of 2:1 is traditionally viewed as a healthy benchmark, though target benchmarks vary by industry.