Which financial statement BEST indicates a fashion brand's ability to meet short-term obligations?

The balance sheet is the financial statement that BEST indicates a fashion brand's ability to meet its short-term obligations. A balance sheet provides a snapshot of a company's assets, liabilities, and equity at a specific point in time. Short-term obligations, also known as current liabilities, are debts due within one year. Key elements on the balance sheet used to assess short-term liquidity include current assets (cash, accounts receivable, inventory) and current liabilities (accounts payable, short-term debt, accrued expenses). Financial ratios derived from the balance sheet, such as the current ratio (current assets divided by current liabilities) and the quick ratio (also known as the acid-test ratio, calculated as (current assets - inventory) divided by current liabilities), provide further insight. For example, a current ratio of 2:1 indicates that a fashion brand has twice as many current assets as current liabilities, suggesting a strong ability to cover its short-term debts. In contrast, a low current ratio (below 1) could signal potential liquidity problems. While the income statement shows profitability and the cash flow statement tracks cash inflows and outflows, the balance sheet directly presents the assets available to cover immediate debts, making it the primary tool for assessing a fashion brand's short-term financial health.