Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 13 - Financial Analysis: The Big Picture - Questions: 11

Answer

The statement of the accountant is correct. Profit margin of 10 % only indicates the company is earning a profit.

Work Step by Step

However, to determine the financial health of the company, more information is needed to find the following: - Current ratio - Working capital - Current cash debt coverage ratio - Receivable turnover ratio - Average collection period - Inventory turnover ratio - Days in inventory - Debt to total assets ratio - Times interest earned ratio - Cash debt coverage ratio - Free cash flow
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