XYZ Corporation

Income Statement (in $ millions)

Item	Amount
Sales Revenue	2,500
Cost of Sales	1,500
Gross Profit	1,000
Operating Expenses	800
Operating Profit	200
Interest Expenses	50
Income Tax Expense	30
Net Income	120

Balance Sheet (in $ millions)

Assets                                

• Current Assets
  • Cash: 30
  • Accounts Receivable: 200
  • Inventory: 350
  • Total Current Assets: 580
• Long-Term Assets
  • Property, Plant & Equipment (net): 600
  • Other Assets: 400
  • Total Long-Term Assets: 1,000
• Total Assets: 1,580

Liabilities and Equity

• Current Liabilities
  • Trade Creditors: 180
  • Short-Term Bank Loans: 150
  • Total Current Liabilities: 330
• Long-Term Liabilities
  • Long-Term Debt: 600
  • Other Liabilities: 50
  • Total Long-Term Liabilities: 650
• Total Liabilities: 980
• Equity
  • Common Shares: 300
  • Retained Earnings: 300
  • Total Equity: 600
• Total Liabilities and Equity: 1,580

Required:

1. Calculate the current ratio and quick ratio for XYZ Corporation.
2. Assess the company's ability to cover its short-term obligations.
3. Determine the debt-to-equity ratio and discuss the company's leverage position.
4. XYZ Corporation plans to acquire a new business for $40 million without using the existing cash. Propose a financing strategy for this acquisition.
5. Suggest potential areas where the company could cut costs to improve its net income.