The correct answer is B. Current ratio.
The current ratio is a liquidity ratio that measures a company’s ability to pay its short-term obligations. It is calculated by dividing current assets by current liabilities. A current ratio of 2:1 or greater is considered to be healthy.
The price-earnings ratio (P/E ratio) is a valuation ratio that compares a company’s stock price to its earnings per share. It is calculated by dividing the stock price by the earnings per share. A high P/E ratio indicates that investors are willing to pay a premium for a company’s stock, which may be due to strong growth prospects or a strong brand name.
The profit margin ratio is a profitability ratio that
measures a company’s ability to generate profit from its sales. It is calculated by dividing net income by net sales. A high profit margin indicates that a company is efficient at generating profit from its sales.The gross margin is a profitability ratio that measures a company’s ability to generate profit from its sales before accounting for operating expenses. It is calculated by dividing gross profit by net sales. A high gross margin indicates that a company is able to sell its products at a high price relative to its costs.
In conclusion, the current ratio is the best index of short-term paying ability because it measures a company’s ability to pay its short-term obligations.