Final answer:
The student is asking about a simple ratio to assess whether a company can pay its short-term obligations. The current ratio is commonly used for this purpose.
Step-by-step explanation:
The subject of this question is Business. The student is asking about a simple ratio to assess whether a company can pay its short-term obligations.
One commonly used ratio to evaluate a company's ability to meet its short-term obligations is the current ratio. The current ratio is calculated by dividing a company's current assets by its current liabilities. A ratio higher than 1 indicates that the company has enough current assets to cover its current liabilities, while a ratio lower than 1 may suggest potential financial difficulties.
For example, if a company has $100,000 in current assets and $75,000 in current liabilities, its current ratio would be 1.33 ($100,000 / $75,000), indicating that the company is in a relatively stable position to meet its short-term obligations.