YZA Tech

Income Statement (in $ thousands)

Item	Amount
Sales Revenue	11,000
Cost of Goods Sold	7,000
Gross Profit	4,000
Operating Expenses	3,000
Operating Profit	1,000
Interest Expenses	180
Income Tax Expense	120
Net Income	700

Balance Sheet (in $ thousands)

Assets

• Current Assets
  • Cash: 200
  • Accounts Receivable: 1,000
  • Inventory: 1,200
  • Total Current Assets: 2,400
• Long-Term Assets
  • Property, Plant & Equipment (net): 2,500
  • Other Assets: 2,100
  • Total Long-Term Assets: 4,600
• Total Assets: 7,000

Liabilities and Equity

• Current Liabilities
  • Trade Creditors: 800
  • Short-Term Bank Loans: 600
  • Total Current Liabilities: 1,400
• Long-Term Liabilities
  • Long-Term Debt: 3,000
  • Other Liabilities: 600
  • Total Long-Term Liabilities: 3,600
• Total Liabilities: 5,000
• Equity
  • Common Shares: 1,200
  • Retained Earnings: 800
  • Total Equity: 2,000
• Total Liabilities and Equity: 7,000

Required:

1. Determine the gross profit margin and net profit margin for YZA Tech.
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. YZA Tech plans to invest $2,000,000 in research and development (R&D) to stay competitive. Propose a financing strategy for this investment.
5. Suggest strategies to improve the company's operating profit margin and cash flow management.