TUV Electronics

Income Statement (in $ millions)

Item	Amount
Sales Revenue	18,000
Cost of Sales	12,000
Gross Profit	6,000
Operating Expenses	4,500
Operating Profit	1,500
Interest Expenses	500
Income Tax Expense	400
Net Income	600

Balance Sheet (in $ millions)

Assets

• Current Assets
  • Cash: 700
  • Accounts Receivable: 3,500
  • Inventory: 3,000
  • Total Current Assets: 7,200
• Long-Term Assets
  • Property, Plant & Equipment (net): 7,500
  • Other Assets: 6,000
  • Total Long-Term Assets: 13,500
• Total Assets: 20,700

Liabilities and Equity

• Current Liabilities
  • Trade Creditors: 2,500
  • Short-Term Bank Loans: 2,000
  • Total Current Liabilities: 4,500
• Long-Term Liabilities
  • Long-Term Debt: 9,000
  • Other Liabilities: 2,500
  • Total Long-Term Liabilities: 11,500
• Total Liabilities: 16,000
• Equity
  • Common Shares: 2,500
  • Retained Earnings: 2,200
  • Total Equity: 4,700
• Total Liabilities and Equity: 20,700

Required:

1. Compute the gross profit margin and net profit margin for TUV Electronics.
2. Calculate the return on equity (ROE) and return on assets (ROA).
3. Assess the company's solvency using the debt-to-equity ratio and interest coverage ratio.
4. TUV Electronics plans to launch a new product line, requiring an investment of $5,000,000. Suggest a financing strategy for this launch.
5. Recommend measures to enhance the company’s gross profit margin and reduce operating expenses.