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c) What is the firm's days' payable outstanding? (4 marks) d) What is the firm's operating cycle? How does it compare to the industry average of 72 days? (4 marks) e) What is the firm's cash conversion cycle? How does it compare to the industry average of 42 days? (4 marks) Question 5 (25 marks) The following information for Kinnis, Inc., a retail furniture and design firm, is presented at December 31, 2020 and 2019: December 31 Assets 2020 2019 Current assets: Cash $ 42,000 Accounts receivable 480,000 $ 54,000 345,000 4,950.000 5,010,000 84,000 5,616,000 1,591,000 $7.207.000 79,000 5,428,000 1.193,000 $6,621,000 Inventory Prepaid expenses Total current assets Building and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Bank loan payable Other accrued payables Total current liabilities Long-term debt Total liabilities $ 705,000 679,000 215.000 1,599,000 1,729,000 3.328,000 $ 628,000 625,000 315.000 1,568,000 1,791,000 3,359,000 Stockholders' equity: Common stock 1,305,000 Retained earnings Total stockholders' equity 1,307,000 2.572,000 3,879,000 1.957,000 3,262.000 1/2 Appendix: Present value tables Table 1: Present value of a single payment/receipt of fl at the end of n years from now, discounted at r% Years 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 2 10.980 0.961 0.943 0.943 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.770 3 10.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 4 10.961 0.924 0.889 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 5 10.952 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.594 0.567 0.543 0.519 6 10.942 0.888 0.838 0.790 0.746 0.705 0.666 0.630 0.596 0.565 0.535 0.507 0.480 0.456 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.584 0.547 0.513 0.482 0.452 0.425 0.400 8 0.924 0.854 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 9 10.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.351 0.317 0.288 0.261 0.237 12 0.887 0.789 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 13 10.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 14 0.870 0.758 0.661 0.578 0.505 0.442 0.388 0.341 0.299 0.263 0.232 0.205 0.181 0.160 15 10.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 16 10.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 0.142 0.123 17 10.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.195 0.164 0.138 0.116 0.098 0.083 20 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 Years 15% 16 % 17 % 18 % 19 % 20% 21 % 22% 23 % 24 % 25 % 30 % 35% 40% 1 .870 0.862 0.855 0.848 0.840 0.833 0.826 0.820 0.813 0.807 0.800 0.769 0.741 0.714 2 9.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640 0.592 0.549 0.510 3 p.658 0.641 0.624 0.609 0.593 0.579 0.565 0.551 0.537 0.525 0.512 0.455 0.406 0.364 4 .572 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0.437 0.423 0.410 0.350 0.301 0.260 5 p.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0.328 0.269 0.223 0.186 6 p.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.262 0.207 0.165 0.133 7 p.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.222 0.210 0.159 0.122 0.095 8 p.327 0.305 0.285 0.266 0.249 0.233 0.218 0.204 0.191 0.179 0.168 0.123 0.091 0.068 9 p.284 0.263 0.243 0.226 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.094 0.067 0.048 10 .247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 0.073 0.050 0.035 11 p.215 0.195 0.178 0.162 0.148 0.135 0.123 0.112 0.103 0.094 0.086 0.056 0.037 0.025 12 p.187 0.169 0.152 0.137 0.124 0.112 0.102 0.092 0.083 0.076 0.069 0.043 0.027 0.018 13 p.163 0.145 0.130 0.116 0.104 0.094 0.084 0.075 0.068 0.061 0.055 0.033 0.020 0.013 14 5.141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044 0.025 0.015 0.009 15 p.123 0.108 0.095 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035 0.020 0.011 0.006 16 .107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028 0.015 0.008 0.005 17 b.093 0.080 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023 0.012 0.006 0.003 18 .081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018 0.009 0.005 0.002 19 5.070 0.060 0.051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0.014 0.007 0.003 0.002 20 .061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0.012 0.005 0.003 0.001 Table II: Present value of fl paid/received at the end of each of n years from now, discounted at r% Years 11% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 1 .990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 2 11.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 1.668 1.647 3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 5 14.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889 7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 9 B.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 10 .471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 12 111.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660 13 112.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 Total liabilities and stockholders' equity $7,207.000 $6,621,000 There were 100,000 shares of common stock outstanding at the end of both years. The income tax rate is 35%. Interest expense totaled $139,000 for 2020 and $158,000 for 2019. The market price per share was $110 at the end of 2019 and $134 at the end of 2020. Net income was $615,000 for 2020 and $739,000 in 2019. Net sales totaled $4,568,000 and $3,253,000 for 2020 and 2019, respectively. a) Calculate the following for 2020 and 2019: (4 x 5 marks each = 20 marks) 1. Earnings per share 2. Price earnings ratio 3. Return on total assets 4. Return on common stockholders' equity b) Comment on any trends apparent in the ratios (5 marks). c) What is the firm's days' payable outstanding? (4 marks) d) What is the firm's operating cycle? How does it compare to the industry average of 72 days? (4 marks) e) What is the firm's cash conversion cycle? How does it compare to the industry average of 42 days? (4 marks) Question 5 (25 marks) The following information for Kinnis, Inc., a retail furniture and design firm, is presented at December 31, 2020 and 2019: December 31 Assets 2020 2019 Current assets: Cash Accounts receivable $ 54.000 345,000 4,950,000 s 42,000 480.000 5,010,000 84,000 5,616,000 1.591,000 $7.207.000 79,000 5,428,000 1,193,000 $6,621,000 Inventory Prepaid expenses Total current assets Building and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Bank loan payable Other accrued payables Total current liabilities Long-term debt Total liabilities $ 705,000 679,000 215.000 1,599,000 1.729,000 $ 628,000 625,000 315.000 1,568,000 1.791,000 3,328,000 3,359.000 Stockholders' equity: Common stock 1,305,000 1,307.000 2.572.000 Retained earnings Total stockholders' equity 1.957.000 3.262.000 3,879,000

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