Topics: Financial statements, Cash flow, Generally Accepted Accounting Principles Pages: 4 (990 words) Published: October 3, 2013

South East University
Managerial finance (5133)
Semester: Spring 2013

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 sheet for the two most recent years and the most recent income statement: WARF COMPUTERS

Balance Sheet
($ in thousands)20102009Current assetsCurrent liabilitiesCash and equivalents$ 290$ 251Accounts payable$ 262Accounts receivable459428Notes payable7166Inventories411425Accrued expenses 158 257Other 59 50Total current liabilities$ 491 $ 568Total current assets$ 1,219 $ 1,154Fixed assetsLong-term liabilitiesProperty, plant, and equipment$ 2,631$ 2,038Deferred taxes$ 212$ 103Less accumulated depreciation 859 700Long-term debt 756...
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