D CONSISTS OF QUESTION 6 AND QUESTION 7. YOU MUST ANSWER ONE QUESTION. c) Explain the difference between solvency and liquidity, and explain why an analyst would be concerned with tracking solvency and liquidity of a company. From the ratios provided, list which ratio(s) helps evaluate the solvency and liquidity of London & South Eastern Railway? Pick one liquidity ratio and interpret it. QUESTION 6 ANSWER ALL PARTS OF THIS QUESTION Show your workings to get full marks. The table below shows financial ratios (as calculated by FAME) for London & South Eastern Railway Limited, a company providing rail transport in London and 4 marks d) Using at least three ratios from the table above, evaluate the overall performance of London & South Eastern Railway over the 5-year period. Discuss two other sources of information you would want to look at to substantiate this analysis. Southeast England. 2020 2019 2018 2017 2016 Profitability Ratios: Return on Shareholders' Equity (%) 32.81 65.37 72.46 77.14 75.77 Return on Capital Employed (%) 23.36 64.65 71.54 77.14 56.13 Return on Total Assets (%) 5.42 16.34 16.26 12.96 11.78 Operating Margin (%) 2.60 5.85 5.89 4.98 4.43 Operational Ratios: Asset Turnover (times) Interest Cover (times) Inventory Turnover (times) Receivables Turnover (times) 5.48 139.20 143.05 122.72 19.68 89.69 81.06 66.26 195.57 205.76 221.34 225.49 84.67 17.82 15.10 17.61 106.02 66.96 249.41 19.26 Settlement Period for Receivables (days) 4.31 20.48 24.18 20.73 18.95 Payment Period for Payables (days) 10.28 12.06 31.47 47.82 41.27 Structure Ratios: Current Ratio (times) Quick Ratio (times) Gearing (%) 0.81 1.31 1.27 1.18 1.23 0.79 1.29 1.25 1.16 1.22 225.23 6.59 5.15 3.62 39.53 a) Discuss two advantages and two disadvantages of using ratios to assess the performance of London & South Eastern Railway over time. 4 marks b) Interpret and discuss the following ratios for London & South Eastern Railway: Inventory turnover Asset turnover 4 marks 5 marks