What does the current ratio measure?

The current ratio specifically measures a company's ability to pay its short-term obligations using its current assets. This financial metric is calculated by dividing current assets by current liabilities. A higher current ratio indicates that a company has sufficient current assets to cover its short-term liabilities, showcasing its liquidity and financial stability. This ratio is crucial for understanding a company’s short-term financial health, particularly in meeting immediate financial obligations.

In the context of the other options, long-term profitability is assessed through different metrics, such as return on equity or net profit margin, and does not relate to short-term liquidity. Leverage and debt levels are typically examined through ratios such as debt-to-equity ratios, rather than the current ratio, which focuses purely on liquidity. Market share is related to a company's sales relative to the overall industry or market but doesn't correlate with its ability to meet short-term financial obligations. Therefore, option B accurately reflects the purpose of the current ratio.