Which ratio measures the relationship of current assets to current liabilities?

The ratio that measures the relationship of current assets to current liabilities is the current ratio. This financial metric is used to assess a company's ability to cover its short-term obligations with its short-term assets. The formula for the current ratio is:

Current Ratio = Current Assets / Current Liabilities

A current ratio greater than one suggests that the company has more current assets than current liabilities, indicating good short-term financial health. It helps stakeholders understand the liquidity position of the business and assess its capacity to meet its short-term obligations.

The other ratios mentioned serve different purposes. The debt ratio focuses on the total liabilities in relation to total assets, which measures financial leverage, while the solvency ratio assesses a company's ability to meet its long-term obligations. Lastly, the profitability ratio centers on assessing a company's ability to generate profit relative to its revenue, assets, or equity. Each of these ratios provides valuable insights into different aspects of financial health, but for analyzing the relationship between current assets and current liabilities, the current ratio is the appropriate choice.