Which auditing term best describes a company's ability to settle its immediate obligations?

The term that best describes a company's ability to settle its immediate obligations is liquidity. Liquidity refers to how easily and quickly a company can convert its assets into cash to meet short-term liabilities. This is a critical aspect of financial health, as it indicates the ability to pay debts that are due in the near term without having to secure additional financing.

Understanding liquidity is important for stakeholders, including investors and creditors, as it reflects the company's short-term financial stability and operational efficiency. Companies typically assess their liquidity using financial metrics such as the current ratio or quick ratio, which compare current assets to current liabilities to gauge how well positioned they are to meet their immediate financial commitments. This analysis is especially crucial during periods of economic uncertainty when cash flow may be unpredictable.