XYZ Mining

Income Statement (in $ thousands)

Item	Amount
Sales Revenue	21,000
Cost of Goods Sold	14,000
Gross Profit	7,000
Operating Expenses	5,800
Operating Profit	1,200
Interest Expenses	700
Income Tax Expense	500
Net Income	0

Balance Sheet (in $ thousands)

Assets

• Current Assets
  • Cash: 1,200
  • Accounts Receivable: 5,500
  • Inventory: 4,500
  • Total Current Assets: 11,200
• Long-Term Assets
  • Property, Plant & Equipment (net): 10,000
  • Other Assets: 9,000
  • Total Long-Term Assets: 19,000
• Total Assets: 30,200

Liabilities and Equity

• Current Liabilities
  • Trade Creditors: 4,000
  • Short-Term Bank Loans: 3,000
  • Total Current Liabilities: 7,000
• Long-Term Liabilities
  • Long-Term Debt: 14,000
  • Other Liabilities: 6,200
  • Total Long-Term Liabilities: 20,200
• Total Liabilities: 27,200
• Equity
  • Common Shares: 2,000
  • Retained Earnings: 1,000
  • Total Equity: 3,000
• Total Liabilities and Equity: 30,200

Required:

1. Calculate the gross profit margin and net profit margin for XYZ Mining.
2. Determine the company's current ratio and quick ratio.
3. Assess the company’s financial leverage using the debt-to-equity ratio.
4. XYZ Mining is planning to invest in new mining equipment worth $7,000,000. Suggest a financing strategy for this investment.
5. Propose measures to improve the company's net income and overall financial health.