case study In your 2-3 page analysis, be sure to thoroughly answer the questions presented with a strong supporting rationale. Be sure to compose your anal
case study In your 2-3 page analysis, be sure to thoroughly answer the questions presented with a strong supporting rationale. Be sure to compose your analysis in APA format with a title page, introduction, and conclusion.
If applicable, include:
references cited in text and in the reference section
appropriate calculations and critical thought
the financial statement of cash flows and the accounting statement of cash flows
any additional documentation or information to support your analysis Mini Case
Cash Flows at Warf Computers, Inc.
Warf Computers, Inc., was founded 15 years ago by Nick Warf, a computer programmer. The small initial investment to start the company was made by Nick and his friends. Over the years, this same group has supplied the limited additional investment needed by the company in the form of both equity and short- and long-term debt. Recently the company has developed a virtual keyboard (VK). The VK uses sophisticated artificial intelligence algorithms that allow the user to speak naturally and have the computer input the text, correct spelling and grammatical errors, and format the document according to preset user guidelines. The VK even suggests alternative phrasing and sentence structure, and it provides detailed stylistic diagnostics. Based on a proprietary, very advanced software/hardware hybrid technology, the system is a full generation beyond what is currently on the market. To introduce the VK, the company will require significant outside investment.
Nick has made the decision to seek this outside financing in the form of new equity investments and bank loans. Naturally, new investors and the banks will require a detailed financial analysis. Your employer, Angus Jones & Partners, LLC, has asked you to examine the financial statements provided by Nick. Here are the balance sheets for the two most recent years and the most recent income statement:
WARF COMPUTERS Balance Sheets ($ in thousands)
Cash and equivalents
Total current liabilities
Total current assets
Property, plant, and equipment
Total long-term liabilities
Less accumulated depreciation
Net property, plant, and equipment
Intangible assets and others
Total fixed assets
Accumulated retained earnings
Less treasury stock
Total liabilities and shareholders’ equity
WARF COMPUTERS Income Statement ($ in thousands)
Cost of goods sold
Selling, general, and administrative expense
Nick also has provided the following information: During the year the company raised $274,000 in new long-term debt and retired $238,000 in long-term debt. The company also sold $19,000 in new stock and repurchased $79,000 in stock. The company purchased $1,778,000 in fixed assets and sold $514,000 in fixed assets.
Angus has asked you to prepare the financial statement of cash flows and the accounting statement of cash flows. He also has asked you to answer the following questions:
1. How would you describe Warf Computers’s cash flows?
2. Which cash flow statement more accurately describes the cash flows at the company?
3. In light of your previous answers, comment on Nick’s expansion plans.