XYZ Company is a manufacturing company that specializes in producing electronic gadgets. As a financial analyst, your

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Question:

XYZ Company is a manufacturing company that specializes in producing electronic gadgets. As a financial analyst, your task is to analyze XYZ Company's financial statements to assess its financial health and performance. You have been provided with the following financial information for the year ending December 31, 20X5:

Income Statement:

Total Revenues: $5,000,000
Cost of Goods Sold: $2,800,000
Gross Profit: $2,200,000
Operating Expenses: $1,300,000
Net Income Before Taxes: $900,000
Income Tax Expense: $250,000
Net Income: $650,000
Balance Sheet (as of December 31, 20X5):

Total Assets: $6,000,000
Total Liabilities: $2,000,000
Total Equity: $4,000,000
Additional Information:

The company's inventory turnover ratio is 4 times.
The company's accounts receivable turnover ratio is 6 times.
The company's return on equity (ROE) is 16%.
The company paid $100,000 in dividends during the year.
The company issued $500,000 in new long-term debt.
The company's current ratio is 2.5.
The company's quick ratio is 1.8.
Tasks:

a) Calculate the following financial ratios:

Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Return on Assets (ROA)
Debt-to-Equity Ratio
Earnings Per Share (EPS)
b) Provide an interpretation of the calculated ratios and assess the company's profitability, liquidity, leverage, and overall financial performance.

c) Based on your analysis, identify any potential financial strengths or weaknesses within XYZ Company and suggest possible strategies or areas for improvement.

d) Analyze the dividend payment and the issuance of new long-term debt, and discuss the potential implications for the company's financial position and future prospects.

e) Given the financial information provided, do you think XYZ Company is in good financial health? Justify your answer with supporting evidence from your analysis.