Which measure could indicate declining liquidity in a company?

The measure indicating declining liquidity in a company is often the quick ratio, which reflects the ability of a company to meet its short-term obligations with its most liquid assets. A decreasing quick ratio suggests that the company has a diminishing capacity to cover its current liabilities without relying on the sale of inventory, which may not be as easily converted to cash. This can be a red flag for stakeholders, indicating potential liquidity issues.

In contrast, an increasing current ratio typically implies that a company is improving its ability to meet short-term obligations, thus indicating healthier liquidity. A stable profit margin suggests consistent profitability, which, while important, does not directly measure liquidity. An increasing return on equity reflects enhanced profitability relative to shareholders' equity, but it does not provide insight into the company's liquid asset position or its ability to meet immediate financial obligations.