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Vern Thoms is puzzled. His company had a profit margin of 10% in 2019. He feels that this is an indication that the company is doing well. Tina Amos, his accountant, says that more information is needed to determine the company's financial well-being. Who is correct?

Respuesta :

anthougo

Answer:

Tina Amos is correct.

Explanation:

It is not enough to use the profit margin of a company to determine its financial well-being.  There are other considerations with regard to its liquidity, solvency, profitability, and operating efficiency.  While the profitability measure is considered as foremost in determining financial health, more information on this profit margin is surely needed.  Financial health is not considered in isolation.  A company must also compare its health with other similar companies in its industry.  A trend analysis of past year's profit margin also needs to be performed to ascertain if the profit margin of 10% in 2019 is adequate and comparable.

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