What are liquidity ratios primarily used to assess?

Liquidity ratios are financial metrics designed to evaluate a company's ability to cover its short-term liabilities with its short-term assets. This assessment is crucial because it indicates whether a company can efficiently manage its cash flow, meet obligations as they come due, and maintain operations without undue financial stress.

The most common liquidity ratios include the current ratio and the quick ratio, which measure the relationship between current assets and current liabilities. A strong liquidity position suggests that a company is in a good position to pay off its dues and sustain its operations, making option B the most accurate choice.

Other choices such as profitability, long-term financial stability, and overall market share focus on different aspects of a company's financial health and operational performance. Profitability ratios analyze how much profit a company generates compared to its revenues and costs. Long-term financial stability ratios assess the sustainability of a company's operations on a long-term basis, while market share pertains to a company's portion of sales in a market relative to competitors. None of these factors are directly related to the short-term solvency that liquidity ratios measure.