What does the convergence ratio measure?

The convergence ratio is a metric used to assess a company's ability to meet its financial obligations. This ratio evaluates the relationship between a company's expected obligations and its resources or income streams that can be used to satisfy those obligations. It helps stakeholders understand how well-positioned a company is to handle its debts and other financial commitments in a timely manner.

When a company has a high convergence ratio, it indicates that it has sufficient or excellent financial resources relative to its obligations, suggesting strong financial health. Conversely, a low ratio may signal potential liquidity issues, where the company might struggle to cover its debts or operational costs.

In contrast, the other choices focus on different financial aspects. Profitability, market share, and revenue growth are important metrics but do not pertain specifically to the assessment of a company's capacity to meet its obligations, which is the focal point of the convergence ratio. The clarity and significance of the convergence ratio highlight the necessity for businesses to have a robust strategy for managing finances and ensuring that they can fulfill their commitments.