What does the quick ratio assess about a business?

The quick ratio, also known as the acid-test ratio, specifically measures a business's ability to meet its short-term liabilities with its most liquid assets. This ratio focuses on immediate financial obligations and provides insight into how quickly a company can generate cash to pay off its current debts, typically within a short timeframe, such as 90 days.

By comparing liquid assets (like cash, marketable securities, and receivables) to current liabilities, the quick ratio emphasizes the business's capacity to respond to urgent financial demands without relying on inventory or other less liquid assets. Therefore, it effectively assesses the business's short-term financial health and liquidity, which is crucial for operational stability.

Options related to long-term financial stability, overall profitability, and total assets do not accurately reflect the purpose of the quick ratio, as it is explicitly designed to evaluate immediate financial obligations rather than general financial performance over time or asset metrics.