。
She can't tell right from wrong.
Literal
She [topic-は] good-evil [possessive-の] distinction [object-を] make [ability-ことができない].
善悪 (ぜんあく) compresses 'good and evil' into a single compound — a common Chinese-origin (漢語) pattern of pairing opposites: 善悪, 正誤 (right/wrong), 長短 (long/short), 大小 (large/small). 区別をつける is a set collocation meaning 'to make a distinction' or 'to tell apart,' and ことができない frames the inability formally. The overall sentence has a judgmental, evaluative tone.