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Case Analysis
PROBLEM The Warf Computers, Inc, founded by Nick Warf, has developed a virtual keyboard that has been considered a full generation above and beyond the current offerings in the market. There is a significant investment that needs to be made to introduce this concept to the market. The investors that would consider the venture would require financial analysis done. The analysis will entail preparation of cash flows as well as the statements of those cash flows. Included in the analysis is the description of the cash flows for the company, the cash flow that indicates a precise description, and an idea of the expansion plans that may take place.
WARF COMPUTERS CASH FLOWS Angus Jones & Partners, LLC, requested statement of cash flows and the accounting statement of cash flows.
The operating cash flow for the company is: (All numbers are in thousands of dollars)
Operating Cash Flow (OCF) = Earnings Before Interest and Taxes (EBIT)+ Depreciation –Current Taxes
OCF= $1,332 + 159 – 386
OCF = $1,105
Before determining the cash flow from assets, the capital spending and change in net working capital must be determined. In order to determine the capital spending for the year one would follow the formula below. | Capital spending | | | Ending net fixed assets | $2,280 | | – Beginning net fixed assets | 1,792 | | + Depreciation | 159 | | Net capital spending | $ 647 | And the change in net working capital was: | Change in net working capital | | Ending NWC | $728 | | – Beginning NWC | 586 | | Change in NWC | $142 | So, the cash flow from assets was: | Cash flow from assets | | | Operating cash flow | $1,105 | | – Net capital spending | 647 | | – Change in NWC | 142 | | Cash flow from assets | $316 | The cash flow to creditors was: | Cash flow to creditors | | | Interest paid | $95 | | – Net New Borrowing | 20 | | Cash flow to Creditors
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