Accounting and Finance
FUND FLOW STATEMENT ANALYSIS
Aims and Objectives
Meaning & Objectives of Fund Flow Statement Analysis Methods of Preparing Fund Flow Statement 7.3.1 Schedule of Changes in Working Capital 7.3.2 Net Profit Method
7.3.3 Sales Method
7.3.4 First Method
7.3.5 Second Method
7.4 Advantages of Preparing Fund Flow Statement 7.4.1 Illustrative Statement of Financing 7.4.2 To fulfil the Primary Objective of the Financial Management 7.4.3 Facilitation through Financial Planning 7.4.4 Guide to Working Capital Management 7.4.5 Indicator of Yester Track Path of the Firm 7.5 Let us Sum up
7.6 Lesson-end Activity
7.8 Questions for Discussion
7.9 Suggested Readings
7.0 AIMS AND OBJECTIVES
In this lesson we shall discuss about fund flow statement analysis. After going through this lesson you will be able to:
(i) understand meaning and objectives of fund flow statement analysis (ii) analyse methods of preparing fund flow statement (iii) discuss advantages of preparing fund flow statement.
Every business establishment usually prepares the balance sheet at the end of the fiscal year which highlights the financial position of the yester years It is subject to change in the volume of the business not only illustrates the financial structure but also expresses the value of the applications in the liabilities side and assets side respectively. Normally, Balance sheet reveals the status of the firm only at the end of the year, not at the beginning of the year. It never discloses the changes in between the value position of the firm at two different time periods/dates. The method of portraying the changes on the volume of financial position is the statement fund flow statement. To put them in nutshell, fund between two different time periods. It is further illustrated that the changes in the financial position or the movement or flow of fund.
MEANING & OBJECTIVES OF FUND FLOW
A report on the movement of funds or working capital. In a narrow sense the term fund means cash and the fund flow statement depicts the cash receipts and cash disbursements/ payments. It highlights the changes in the cash receipts and payments as a cash flow statement in addition to the cash balances i.e., opening cash balance and closing cash balance. Contrary to the earlier, the fund means working capital i.e., the differences between the current assets and current liabilities. The term flow denotes the change. Flow of funds means the change in funds or in working capital. The change on the working capital leads to the net changes taken place on the working capital i.e., especially due to either increase or decrease in the working capital. The change in the volume of the working capital due to numerous transactions. Some of the transactions may lead to increase or decrease the volume...
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