KLM Telecom

Income Statement (in $ thousands)

Item	Amount
Sales Revenue	15,000
Cost of Goods Sold	10,000
Gross Profit	5,000
Operating Expenses	3,800
Operating Profit	1,200
Interest Expenses	350
Income Tax Expense	250
Net Income	600

Balance Sheet (in $ thousands)

Assets

• Current Assets
  • Cash: 400
  • Accounts Receivable: 2,200
  • Inventory: 2,000
  • Total Current Assets: 4,600
• Long-Term Assets
  • Property, Plant & Equipment (net): 4,500
  • Other Assets: 4,000
  • Total Long-Term Assets: 8,500
• Total Assets: 13,100

Liabilities and Equity

• Current Liabilities
  • Trade Creditors: 1,800
  • Short-Term Bank Loans: 1,200
  • Total Current Liabilities: 3,000
• Long-Term Liabilities
  • Long-Term Debt: 6,000
  • Other Liabilities: 1,500
  • Total Long-Term Liabilities: 7,500
• Total Liabilities: 10,500
• Equity
  • Common Shares: 1,500
  • Retained Earnings: 1,100
  • Total Equity: 2,600
• Total Liabilities and Equity: 13,100

Required:

1. Compute the gross profit margin and net profit margin for KLM Telecom.
2. Calculate the return on equity (ROE) and return on assets (ROA).
3. Evaluate the company's liquidity using the current ratio and quick ratio.
4. KLM Telecom is considering acquiring a new technology firm for $3,000,000. Suggest a financing strategy for this acquisition.
5. Propose measures to improve the company's operating profit margin and reduce interest expenses.