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, 2014, and $31.00 at December 31, 2013.

• Weighted-average number of common shares outstanding: 15,000 during 2014 and 12,000 during 2013.

• There are 2,000 preferred shares outstanding.

• All sales are on credit.

Required

1. Compute the following ratios for 2014 and 2013:

a. Current ratio

b. Inventory turnover

c. Accounts-receivable turnover

d. Times-interest-earned ratio

e. Return on assets

f. Return on common shareholders’ equity

g. Earnings per common share

h. Price/earnings ratio

i. 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 2014 and (b) whether the investment attractiveness of its common shares appears to have increased or decreased.

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

AVENGER HARDWARE LTD Income Statement For the Years Ended December 31, 2014 and 2013 2013 $310,000 351 500 201,000 150,500 65,000 85,500 26,000 Net sales Cost of goods sold Gross margin Operating expenses Income from operations Interest expense Income before income tax 155,000 71,000 84,000 20,000 64,000 2,500 Income tax expense Net income AVENGER HARDWARE LTD Balance Sheet December 31, 2014 and 2013 (Selected 2012 amounts given for computation of ratios) 2014 2013 2012 Current assets: Cash $ 21,000 25,000 116,000 149,000 6,000 292,000 154,500 Current receivables, net $ 62,500 86,000 137,000 9,000 251,500 143,500 $446,500 $395,000 351,500 Inventories Prepaid expenses Propenty, plant, and equipment, net Total assets Total current liabilities Long-term liabilites 1145 121,000 Total liabilities Preferred shares, $1.50 Common shares Retained earnings 0,000 75,000 30,000 60,000 60,000 19,000