YZQ Transportation

Income Statement (in $ millions)

Item	Amount
Sales Revenue	20,000
Cost of Sales	13,000
Gross Profit	7,000
Operating Expenses	5,500
Operating Profit	1,500
Interest Expenses	700
Income Tax Expense	400
Net Income	400

Balance Sheet (in $ millions)

Assets

• Current Assets
  • Cash: 1,000
  • Accounts Receivable: 5,000
  • Inventory: 4,000
  • Total Current Assets: 10,000
• Long-Term Assets
  • Property, Plant & Equipment (net): 9,000
  • Other Assets: 8,000
  • Total Long-Term Assets: 17,000
• Total Assets: 27,000

Liabilities and Equity

• Current Liabilities
  • Trade Creditors: 3,500
  • Short-Term Bank Loans: 2,500
  • Total Current Liabilities: 6,000
• Long-Term Liabilities
  • Long-Term Debt: 12,000
  • Other Liabilities: 4,000
  • Total Long-Term Liabilities: 16,000
• Total Liabilities: 22,000
• Equity
  • Common Shares: 3,000
  • Retained Earnings: 2,000
  • Total Equity: 5,000
• Total Liabilities and Equity: 27,000

Required:

1. Compute the gross profit margin and net profit margin for YZQ Transportation.
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. YZQ Transportation plans to invest $6,000,000 in upgrading its fleet. Suggest a financing strategy for this investment.
5. Recommend measures to improve the company’s operating profit margin and reduce interest expenses.