Final answer:
The current ratio measures liquidity as it assesses a company's ability to pay its short-term obligations using its current assets.
Step-by-step explanation:
The current ratio measures Liquidity as it assesses a company's ability to pay its short-term obligations using its current assets. It compares a company's current assets to its current liabilities. A high current ratio indicates that a company has enough current assets to cover its current liabilities, while a low current ratio suggests that a company may struggle to meet its short-term obligations.
For example, if a company has $100,000 in current assets and $50,000 in current liabilities, the current ratio would be 2:1, which means that the company has $2 in current assets for every $1 in current liabilities.