Which metric is primarily used to gauge a company's short-term financial health?

The metric primarily used to gauge a company's short-term financial health is the Acid Test Ratio, also known as the Quick Ratio. This financial ratio assesses a company's ability to meet its short-term obligations with its most liquid assets. It is calculated by taking current assets, subtracting inventories, and then dividing by current liabilities.

The reason the Acid Test Ratio is particularly relevant for evaluating short-term financial health is that it focuses on assets that can be quickly converted to cash, thus providing insight into the company's liquidity position. A higher ratio indicates that the company can comfortably cover its short-term liabilities without having to sell inventory, which may not be as readily converted to cash.

While other metrics such as the Debt to Equity Ratio, Times Interest Earned, and Receivables Turnover provide important insights into different aspects of a company’s financial status, they do not specifically measure short-term liquidity in the same direct way. The Debt to Equity Ratio assesses long-term financial leverage, Times Interest Earned evaluates a company’s capacity to meet interest payments on debt, and Receivables Turnover focuses on efficiency in collecting receivables. Therefore, the Acid Test Ratio stands out for its direct indication of a company's immediate financial health.