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Chapter 8 Fund Flow Statement
Statements of changes in Financial Position -
The statement of changes in financial position, often referred to as the fund flow statement, describes the financing and investment activities of a business enterprise.
Funds are defined in one of two ways - i) Funds are defined as cash. ii) Funds are defined as working capital
Funds are defined as cash:
The statement of changes explains the amount of cash that various financing activities provided, the cash used for various investing activities and the resulting change in the cash balance from the beginning of the accounting period to the end, as shown in balance sheets
The statement of changes with funds defined as cash is of interest primarily to informal managers. Managers use information on day-to-day operations of the business and must manage the flow of cash carefully to monitor current operations and control the flow of current assets and liabilities. They must have detailed information as each component of working capital, including cash.
Funds are defined as working capital
When funds are defined as working capital, the statement of changes explains how much working capital the financing and investing activities provided and used, and how working capital changed from the beginning of the accounting period to the end of the accounting period.
Funds are usually defined as working capital in statements prepared for external users e.g. investors, shareholders; financial analysts are usually not interested in the detailed operations that are disclosed by cash flow information. They need a broad view of fund flows to ascertain the general well being of the company and its activity to generate funds.
Sources and Uses of Funds -
There are four types of financing activities that provide funds: - The primary sources of funds for majority of business are from operations. 1. Capital contributed by the owners during the accounting period. 2.
Statements of changes in Financial Position -
The statement of changes in financial position, often referred to as the fund flow statement, describes the financing and investment activities of a business enterprise.
Funds are defined in one of two ways - i) Funds are defined as cash. ii) Funds are defined as working capital
Funds are defined as cash:
The statement of changes explains the amount of cash that various financing activities provided, the cash used for various investing activities and the resulting change in the cash balance from the beginning of the accounting period to the end, as shown in balance sheets
The statement of changes with funds defined as cash is of interest primarily to informal managers. Managers use information on day-to-day operations of the business and must manage the flow of cash carefully to monitor current operations and control the flow of current assets and liabilities. They must have detailed information as each component of working capital, including cash.
Funds are defined as working capital
When funds are defined as working capital, the statement of changes explains how much working capital the financing and investing activities provided and used, and how working capital changed from the beginning of the accounting period to the end of the accounting period.
Funds are usually defined as working capital in statements prepared for external users e.g. investors, shareholders; financial analysts are usually not interested in the detailed operations that are disclosed by cash flow information. They need a broad view of fund flows to ascertain the general well being of the company and its activity to generate funds.
Sources and Uses of Funds -
There are four types of financing activities that provide funds: - The primary sources of funds for majority of business are from operations. 1. Capital contributed by the owners during the accounting period. 2.