Which ratio is a liquidity ratio that focuses on the company's cash position?

The cash ratio is indeed the appropriate choice for a liquidity ratio that focuses specifically on the company's cash position. It is calculated by dividing the firm's cash and cash equivalents by its current liabilities. This ratio measures the company’s ability to pay off its current liabilities with its most liquid assets—cash.

Unlike other liquidity ratios, the cash ratio provides a stringent assessment as it only considers cash and cash equivalents, excluding inventory and receivables that may not be as readily convertible to cash. A higher cash ratio indicates a stronger liquidity position, showcasing that the company has enough cash on hand to cover its short-term obligations.

The current ratio and the quick ratio, while also liquidity measures, include current assets beyond cash, which can provide a less conservative view of liquidity. The current ratio accounts for all current assets, whereas the quick ratio focuses on liquid assets excluding inventory but still includes receivables and other assets. Net working capital refers to the difference between current assets and current liabilities but does not express liquidity in a ratio format, making it less specific regarding cash position compared to the cash ratio.