Which financial measure indicates the ability of an organization to meet its short-term obligations?

Liquidity ratios are the financial measures that specifically assess an organization’s ability to meet its short-term obligations. These ratios focus on the company’s most liquid assets and compare them to its current liabilities, providing insights into the firm's financial health and operational efficiency. Common liquidity ratios include the current ratio and the quick ratio.

A higher liquidity ratio indicates a stronger ability to pay off short-term debts, which is crucial for maintaining operational stability and avoiding financial distress. This is particularly important for stakeholders who want to ensure that the organization can continue its operations without encountering cash flow issues.

On the other hand, activity ratios measure how efficiently an organization utilizes its assets, efficiency ratios evaluate how well the company is using its resources to generate income, and leverage ratios assess the degree to which a company is funding its operations through debt. While these ratios provide valuable information about different aspects of financial health, they do not directly measure the ability to meet short-term obligations. Thus, liquidity ratios are the most appropriate measure for this specific inquiry.