7.11 The 2000-2001 income statement and balance sheet for Buffalo Best are presented in Tables 7. Ao and 7.A7. The WACC for Butfalo Best is 10 pcrcent for both years. Review and comment on the performance of the company based on the following A Liquidity, activity, and profitability B Uses and sources of funds C. Value creation hased on EVA analysis TABLE 7 A6 Income Statement of Buffalo Best Year 2001 Year 2000 (dollars) (dallars) Sales 18,000 17,000 Cost of goods sold 10 500 11,000 Gross margin 7,000 6,500 Administrative and selling expenses 3,500 500 3,200 500 Depreciation 1,000 1,000 Earning before interest and tax (EBIT) Interest 2,000 100 1,800 100 1,900 570 1,700 Taxable income Tax (30 percent) 510 1,330 330 1,190 190 Net profit after tax (NOPAT) Dividends Retained carnings 1,000 1,000 TABLE 7.A7 Balance Sheet of Buffalo Best Year 2001 (dollars) Year 2000 (dollars) Assets 5,000 15,000 10,000 6,000 10,000 7,300 Cash and securities Accounts receivable Inventory Net fixed assets (Investment minus accumulated depreciation) Other 51,000 50,000 1,200 1,000 Total assets 81,000 75,500 Liabilities Accounts payable Other short-term liabilities Long-term liabilities 20,000 26,000 1,000 15,000 24,000 1,500 Total liabilities 47,000 40,500 Equities at par value Capital surplus Retained earnings 1,000 1,000 14,000 20,000 12,000 21,000 Total liabilities and owners' equities 81,000 75,500