Comparative financial statement data of Avenger Hardware Ltd. are as follows:

Other information:

• Market price of Avenger Hardware Ltd. common shares: $19.00 at December 31, 2020, and $31.00 at December 31, 2019.

• Weighted-average number of common shares outstanding: 15,000 during 2020 and 12,000 during 2019.

• There are 2,000 preferred shares outstanding. Dividends were declared each year.

• All sales are on credit.

Required

1. Compute the following ratios for 2020 and 2019, rounding all answers to two decimal places:

a. Current ratio

b. Inventory turnover

c. Accounts receivable turnover

d. Debt/equity ratio

e. Times-interest-earned ratio

f. Return on assets

g. Return on common shareholders’ equity

h. Earnings per common share

i. Price–earnings ratio

j. Book value per common share at year end

2. Decide 

(a) Whether Avenger Hardware Ltd.’s ability to pay its debts and to sell inventory improved or deteriorated during 2020 

(b) Whether the investment attractiveness of its common shares appears to have increased or decreased.

Transcribed Image Text:

AVENGER HARDWARE LTD. Income Statement For the Years Ended December 31, 2020 and 2019 2020 2019 Net sales $351,500 $310,000 Cost of goods sold Gross margin 201,000 155,000 150,500 155,000 Operating expenses 65,000 71,000 Income from operations 85,500 84,000 Interest expense 26,000 20,000 Income before income tax 59,500 64,000 Income tax expense 19,000 22,500 Net income $ 40,500 $ 41,500