The use of railroad transportation has changed dramatically around the world.

Attitudes about railroads and railroad usage differ across countries. In England, the rail- roads were run by the government until recently. Five years ago, Railtrack Group PLC became a publicly traded company. The largest railroad company in the United States is Burlington Northern Railroad Company. The following data were taken from the 1998 financial statements of each company.

.Instructions

(a) Calculate the following 1998 liquidity ratios and discuss the relative liquidity of the Iwo companies.

(1) Current ratio.

(2) Acid-test.

(3) Current cash debt coverage.

(4) Receivables turnover.

(b) Calculate the following 1998 solvency ratios and discuss the relative solvency of the two companies.

(1) Debt to total assets.

(2) Times interest earned.

(3) Cash debt coverage.

(c) Calculate the following 1998 profitability ratios and discuss the relative profitability of the two companies.

(1) Asset turnover.

(2) Profit margin.

(3) Return on assets.

(4) Return on common stockholders' equity.

(d) What other issues must you consider when comparing these two companies?

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Railtrack Group (pounds in millions) Burlington Northern (dollars in millions) Financial Highlights 1998 1997 1998 1997 Cash and short-term investments 380 26 $ 95 $ -0- Accounts receivable 434 402 676 632 Total current assets 909 521 1,357 1,197 Total assets 7,095 5,760 22,725 21,199 Current liabilities 1,128 1,209 2,175 2,089 Total liabilities 3,882 2,888 14,497 14,176 Total stockholders' equity 3,213 2,872 8.228 7,023 Sales 2,573 8,936 Operating costs 2,102 6,781 Interest expense 93 293 Income tax expense 3 733 Net income 425 1,206 Cash provided by operations 988 2,107