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
