Comparative financial statement data of Shabby Chic Furniture Company follow:

Other information follows:

1. Market price of a share of common stock was $31.00 at December 31, 2018, and $48.50 at December 31, 2017.

2. Average common shares outstanding were 11,000 during 2018 and 12,000 during 2017.

Requirements

1. Compute the following ratios for 2018 and 2017. Round to two decimal places. Assume all sales are on credit.

a. Current ratio

b. Inventory turnover

c. Accounts receivable turnover

d. Interest coverage ratio

e. Return on equity

f. Earnings per share of common stock

g. Price-earnings ratio

2. Decide

(a) Whether Shabby Chic Furniture Company?s performance improved or deteriorated during 2018

(b) Whether the attractiveness of its common stock as an investment seems to have increased or decreased.

3. How will what you learned in this problem help you evaluate an investment?

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Shabby Chic Furniture Company Income Statement Years Ended December 31, 2018 and 2017 2018 2017 $453,000 $490,000 240,000 Net Sales Cost of Goods Sold 231,000 Gross Profit 222,000 250,000 Operating Expenses Income from Operations 133,000 89,000 132,000 118,000 Interest Expense 16,000 73,000 10,000 108,000 Income Before Income Tax Income Tax Expense 24,000 $ 49,000 30,000 $ 78,000 Net Income Shabby Chic Furniture Company Balance Sheet December 31, 2018 and 2017 (Selected 2016 amounts given for computation of ratios) 2018 2017 2016 Current Assets: $ 98,000 $ 97,000 45,000 $ 42,000 Cash Accounts Receivable, Net Inventory Prepaid Expenses 51,000 216,000 230,000 206,000 22,000 387,000 30,000 402,000 Total Current Assets 176,000 $563,000 198,000 $600,000 Property, Plant, and Equipment, Net Total Assets Total Current Liabilities $230,000 $210,000 Long-Term Liabilities 113,000 343,000 121,000 331,000 Total Liabilities Common Stockholders' Equity, No Par Total Liabilities and Stockholders' Equity 220,000 $563,000 269,000 $600,000 280,000