Which ratio indicates a business's ability to pay off its short-term liabilities in a crisis?

The correct choice is the acid test ratio, also known as the quick ratio. This financial metric is specifically designed to evaluate a company's ability to meet its short-term liabilities using its most liquid assets. The acid test ratio excludes inventory from current assets, which may not always be quickly convertible to cash, thereby providing a more conservative view of a company's liquidity in times of financial stress.

In a crisis situation, it is crucial for a business to have immediate access to cash or easily liquidated assets to cover its obligations. The acid test ratio offers a snapshot of this capability by focusing on liquid assets such as cash, cash equivalents, and receivables. A higher ratio indicates better financial health and readiness to respond to unexpected short-term pressures, making it a reliable indicator of liquidity.

While the current ratio also assesses a firm's ability to cover its short-term liabilities, it includes inventory in its calculations, which can be misleading if the inventory is not readily sellable. Options like net profit percentage and return on capital employed focus on profitability and efficiency respectively, rather than on liquidity and the ability to handle financial emergencies. Thus, the acid test ratio is particularly relevant in assessing a business's position during critical situations.