CASE STUDY CONTINUATION

In view of the above cash flow statement, it is clearly visible that Warf computers has positive cash flows from operating activities which can be considered as healthy for any organisation. It has negative cash flow in investment activities which is due to purchase of new fixed asset which is a sign of expansion plan of Warf Computers. Again it has negative cash flow from financing activities which means it has more of outflow than inflow. This is mainly owing to payment of dividend to shareholders and interest to long term debt. It has received long term debt of $ 175,000 and sold stock worth $ 12,000 and paid long term debt of $ 151,000 and buyback stock worth $ 48,000. Overall it has reduced its long term funding by $12,000 (175000+12000 - 151000 - 48000). So there is no significant raising of capital as far as financing activity is concerned. Hence we can come to a conclusion that although Warf computers has bought new fixed assets, it is not necessarily towards expansion as there is no rise in capital funds. Although it might be possible that Warf computers is planning an expansion from the funds raised by its own operations.