Daniel Shapon is puzzled. His company had a profit margin of 10% in
2005. He feels that this is an indication that the company is doing
well. Suzie Franklin, his accountant, says that more information is
needed to dermine the company's financial well-being. who is correct?
Why?

Profit Margin: Ratio of a company's net income to its net sales; the
percent of income in each dollar of revenue.

The main thing that sticks out to me is that this doesn't take into
assets.  If the company has $1,000,000 in assets (all paid for so
there is no interest) and their revenues are $10,000 then even if
their profit margin is 100% then they're not doing well because that
$1,000,000 in assets should be generating more money.

Suzie Franklin is right, the company could have an incredible profit
margin, even better than 10%, but still be in bad shape if it has a
bad balance sheet, for example if it has a great deal of debt coming
due next week, and not enough cash to cover the balance

Suzie is correct. A single ratio by itself may not be very meaningful
and is best interpreted by comparison with (1) past ratios of the same
company, (2) ratios of other companies, or (3) industry norms or
predetermined standards. In addition, other ratios of the enterprise
are necessary to determine overall financial well-being.