Which of the following is an indicator of a company's liquidity?

The current ratio is indeed an important indicator of a company's liquidity. It measures a company’s ability to cover its short-term obligations with its short-term assets. The formula for the current ratio is current assets divided by current liabilities. A higher current ratio suggests that the company has more than enough assets to pay off its liabilities, indicating stronger liquidity.

Liquidity is crucial for any business, as it provides insight into the company’s capacity to meet its immediate and short-term financial commitments without needing to sell long-term assets or raise capital. If a company's current ratio is less than 1, it could signal potential liquidity problems, which may raise concerns for investors and creditors.

In contrast, the other choices presented assess different aspects of financial health. The debt to equity ratio evaluates financial leverage and the amount of debt relative to shareholders' equity, which does not directly reflect liquidity. Gross profit margin measures profitability but doesn’t provide information about short-term financial health. Return on investment assesses the efficiency of an investment in generating returns, which also is not a direct measure of liquidity.

Thus, the current ratio stands out as a focused indicator of liquidity, making it the correct choice in this context.