Fund Flow Statement is a widely used tool in the hands of financial executives for analyzing the financial performance of a concern. Funds keep on moving in a business which itself is based on a going concern concept. In a narrow sense, it means cash only and a funds flow statements prepared on this basis is called as Cash Flow Statement. Such a statement enumerates net effects of the various business transactions on cash and takes into account receipts and disbursements of cash. In a broader sense, the term “Fund” refers to money values in what ever form it may exist. Here “Funds” means all financial resources in the form of men, Materials, Money, Machinery etc. But in a popular sense, the term “Funds”, means working capital, i.e. the excess of current assets over current liabilities. When the funds move inwards or outwards, they cause a flow or rotation of funds. The word “Fund” here means net working capital.
Objective of Fund Flow Statement:
The main purposes of Fund Flow Statement are:
1. To help to understand the changes in assets and assets sources which are not readily evident in the income statement of financial statement.
2. To inform as to how the loans to the business have been used.
3. to point out the financial strengths and weakness of the business.
Format of Fund Flow Statement
| Sources | | Applications |
| Fund from operation | - | Fund lost in operations |
| Non-trading incomes | | Non-operating expenses |
| Issues of shares | | Redemption of redeemable preference share |
| Issue of debentures | | Redemption of debentures |
| Borrowing of loans | | Repayment of loans |
| Acceptance of deposits | | Repayment of deposits |
| | | Purchase of long term instruments |
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