Question 9 (2+3+2+3=10 marks) As a consultant, you are interested in investing in Sydney Ltd who is a manufacturing company. You have gathered the following data which details certain ratios for Sydney Ltd at the end of year 2020 and 2021. Year Year 2020 2021 Industry average 2021 Page 8 of 13 Asset turnover ratio 0.6 times 0.7 times 0.62 times Cash flow ratio 0.4 times 0.6 times 0.5 times Current ratio 1.5 times 2.4 times 2.1 times Days debtors 130 days 136 days 138 days Days inventory 56 days 52 days 49 days Debt coverage ratio 6.34 times 5.68 times 5.1 times Debt to equity ratio 120% 105% Gross profit margin 40% 43.8% 90% 45.8% Interest coverage ratio 5.8 times 6.2 times Profit margin ratio 15.5% 18.3% 6.5 times 18.8% Quick ratio Return on assets 0.8 times 9.5% 1.4 times 1.2 times 11.2% 10.6% Return on equity 11.6% 13.8% 12.5% Required: (a) Which ratios focus on profitability? (2 marks) (b) Comment on Sydney Ltd's liquidity. (3 marks) (c) How is asset turnover ratio calculated and what does this ratio tell us? (2 marks) (d) In terms of capital structure, comment on the debt to equity ratio and interest coverage ratio of Sydney Ltd (3 marks)