PQR Services

Income Statement (in $ millions)

Item	Amount
Sales Revenue	8,500
Cost of Sales	5,000
Gross Profit	3,500
Operating Expenses	2,500
Operating Profit	1,000
Interest Expenses	150
Income Tax Expense	100
Net Income	750

Balance Sheet (in $ millions)

Assets

• Current Assets
  • Cash: 90
  • Accounts Receivable: 600
  • Inventory: 800
  • Total Current Assets: 1,490
• Long-Term Assets
  • Property, Plant & Equipment (net): 1,400
  • Other Assets: 1,200
  • Total Long-Term Assets: 2,600
• Total Assets: 4,090

Liabilities and Equity

• Current Liabilities
  • Trade Creditors: 450
  • Short-Term Bank Loans: 350
  • Total Current Liabilities: 800
• Long-Term Liabilities
  • Long-Term Debt: 1,500
  • Other Liabilities: 300
  • Total Long-Term Liabilities: 1,800
• Total Liabilities: 2,600
• Equity
  • Common Shares: 700
  • Retained Earnings: 790
  • Total Equity: 1,490
• Total Liabilities and Equity: 4,090

Required:

1. Calculate the gross profit margin and operating profit margin for PQR Services.
2. Determine the company's return on assets (ROA) and return on equity (ROE).
3. Assess the company’s liquidity using the current ratio and quick ratio.
4. Discuss the implications of a potential increase in the company's interest expenses by $50 million.
5. Suggest strategies to improve the company’s overall financial performance and cash flow management.