What financial metric helps assess a company's short-term financial health?

Working capital is a crucial financial metric that reflects a company's short-term financial health by measuring the difference between its current assets and current liabilities. This assessment provides insight into the company’s ability to cover its short-term obligations with its short-term assets. Essentially, positive working capital indicates that a company can comfortably meet its obligations and invest in its operations, while negative working capital may signal potential liquidity issues.

In contrast, net profit margin focuses on the overall profitability of a company relative to its revenues, not specifically on short-term financial health. The debt to equity ratio assesses long-term financial stability by comparing total liabilities to shareholders' equity, which does not directly address short-term liquidity. Lastly, return on assets evaluates how efficiently a company uses its assets to generate profit across its overall operations rather than its capacity to manage short-term liabilities. Therefore, working capital distinctly serves the purpose of evaluating short-term financial health.