Mini Case 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) 2021 2022 2021 2022 Current assets current liabilities Cash and equivalents $ $16 $ 596 Accounts payable $ 645 $ 685 Accounts receivable 883 945 Accrued expenses 529 329 Inventories 875 846 Total current liabilities $1.174 $ 1.014 Other OB 121 Long-term liabilities Total current assets $2.377 $2,508 Deferred taxes $ 210 $ 282 Fixed assets Long-term debt 1.517 1.557 Property, plant, and equipment $4.197 $5.476 Total long-term liabilities $1,727 $1.839 Less accumulated depreciation 1.441 1.777 Stockholders equity Net property, plant, and equipment $2.756 $3.699 Preferred stock $ 25 s 25 Intangible assets and others 936 1.047 Common stock 166 171 Total fixed assets $3.962 $4.746 Capital surplus 1.027 1,044 Accumulated retained earnings 2,116 3,414 Less treasury stock 166 253 Total equity $3,168 $4,401 Total assets $6,069 $7.254 Total liabilities and shareholdersi equity $6,069 $7.254 WARF COMPUTERS INCOME STATEMENT (in thousands) WARF COMPUTERS INCOME STATEMENT (in thousands) Sales Interest expense $9.975 180 Cost of goods sold Pretax income $2.742 5.882 Selling, general, and administrative expense Taxes 687 933 Current: $615 Depreciation 336 Deferred: $72 Operating income $2.824 Net income $2,055 Other income 98 Dividends: $757 EBIT $2.922 Retained earnings: $1.298 Nick also has provided the following information: During the year the company raised $301.000 in new long-term debt and retired $261.000 in long-term debt. The company also sold $22,000 in new stock and repurchased $87,000 in stock. The company purchased $1,955,000 in fixed assets and sold $565,000 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