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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 exam- ine 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 in 2012 2011 2012 2011 Current liabilities Cash and equivalents348 30 Accounts payable 551 514 Notes payable rec Accrued expenses Total current Total current assets $1463 $I,385 Long-term liabilities Pn equipment 3,191 $2,446 -term debt Total long-term $1.161 $1,007 Net property. plant, and Stockholders equity -40-96 Intangible assets and others Total fxed assets $2770 515Capital surplus $2,770 $2,15 Accumulated retained ,904 ,233 eamings Total equity$2.483 1.848 Total liabilities and $4,233 $3,536 shareholders equity $4,233 $3,536 assets

Nick has also provided the following information: During the year the company raised $175,000 in new long-term debt and retired $151,000 in long-term debt. The company also sold S12,000 in new stock and repurchased $48,000 in stock. The company purchased $1,140,000 in fixed assets and sold $330,000 in fixed assets. WARF COMPUTERS Income Statement $ in thousands) Sales Cost of goods sold Selling, general, and administrative expense Depreciation Operating income Other income EBIT Interest expense Pretax income Taxes $5,813 3,430 652 191 $1,540 58 $1,598 105 $1,493 597 Current: $467 Deferred: 130 Net income Dividends Retained earnings $ 896 $225 $ 67

A. What's the EBIT for the company?

a. 1,568

b. 1,598

c. 1,540

B. What's the operating cash flow for the company?

a. 1,598

b. 1,322

c. 1,620

C. What's the amount of capital spending?

a. 191

b. 810

c. 170

D. What's the company's cash flow to creditors?

a. 81

b. 105

c. 91

E. What is the company's cash flow to stockholders?

a. 225

b. 231

c. 261

Could you show what formula you used to find the answer as well? Thank you so much!

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