Final answer:
The best way to measure a company's ability to pay long-term liabilities is by using solvency ratios, which provide insight into the company's long-term financial health and ability to meet its obligations.
Step-by-step explanation:
The best way to measure the ability of a company to pay long-term liabilities is through solvency ratios. Solvency ratios are designed to assess a company's long-term financial health by evaluating whether its cash flow is sufficient to meet its long-term obligations. Common solvency ratios include the debt to equity ratio, interest coverage ratio, and the equity multiplier. In contrast, liquidity ratios focus on short-term assets and liabilities, profitability ratios measure a company’s ability to generate profit relative to its revenue, expenses, or assets, and total asset turnover ratios measure how efficiently a company uses its assets to generate sales.