VWX Retailers

Income Statement (in $ millions)

Item	Amount
Sales Revenue	10,000
Cost of Sales	6,000
Gross Profit	4,000
Operating Expenses	2,800
Operating Profit	1,200
Interest Expenses	200
Income Tax Expense	150
Net Income	850

Balance Sheet (in $ millions)

Assets

• Current Assets
  • Cash: 150
  • Accounts Receivable: 900
  • Inventory: 1,000
  • Total Current Assets: 2,050
• Long-Term Assets
  • Property, Plant & Equipment (net): 2,200
  • Other Assets: 1,750
  • Total Long-Term Assets: 3,950
• Total Assets: 6,000

Liabilities and Equity

• Current Liabilities
  • Trade Creditors: 600
  • Short-Term Bank Loans: 500
  • Total Current Liabilities: 1,100
• Long-Term Liabilities
  • Long-Term Debt: 2,500
  • Other Liabilities: 400
  • Total Long-Term Liabilities: 2,900
• Total Liabilities: 4,000
• Equity
  • Common Shares: 1,000
  • Retained Earnings: 1,000
  • Total Equity: 2,000
• Total Liabilities and Equity: 6,000

Required:

1. Calculate the operating profit margin and net profit margin for VWX Retailers.
2. Determine the company's current ratio and quick ratio.
3. Assess the company’s financial leverage using the debt-to-equity ratio.
4. VWX Retailers is considering issuing bonds to raise $500 million. Discuss the potential effects on the company’s financial structure and interest expenses.
5. Recommend ways to improve the company's gross profit margin and operating efficiency.