Looking for a Tutor Near You?

Post Learning Requirement »
x

Choose Country Code

x

Direction

x

Ask a Question

x

x
x
For better view click here
x
Hire a Tutor
DISCOVER

Fund Flow Statement

Loading...

Published in: Accountancy
4,185 Views

A short note of Fund Flow Statement.

Neelam T / Mumbai

5 years of teaching experience

Qualification: MBA Finance

Teaches: BBA Tuition, BBA Subjects, Management Subjects, Slow Learners

Contact this Tutor
  1. Funds Flow Statement One of the most fundamental objectives of business is to make a profit. Long run survival requires that the business must be able to deal with any possible liquidity problems which arise in the short term. Basically any business must be concerned with making a profit and maintaining a solvent financial position. 1. 2. 3. 4. 5. 6. 7. 8. Objectives of Funds Flow statement: An analysis of the flow of liquid funds can be very useful in making decisions concerning liquidity. A full understanding of a business's affairs requires the identification of the changes or movements in assets, liabilities and capital for a year, and the resultant effect on liquid resources. A profit & loss account or balance sheet does not specifically disclose this information. To show the manner in which the operations have been financed, and how the financial resources have been used. They provide useful guide to creditors & lenders. Various ways to improve the net working capital position can be decided. It focuses attention on resources available for capital investment. It is useful in deciding how fixed assets should be financed. It is useful in planning the retirement of debt. It is now necessary to understand the Balance Sheet in a different way. E.g. Long term and short term Funds and its application.
  2. Liabilities Long Term Equity Share Capital Pref. Share Capital Reserves & Surplus Debentures Term Loan Long term unsecured loans Short Term Bank CC Creditors Provisions 2 Assets Long Term Fixed Assets Investments Short Term Stock Debtors Cash & Bank balances Loans & Advances Ideally Funds Flow statement should reveal transfer of Long Term Funds to Short Term Use. If Short-Term Funds are fransferred to Long Term Use, it will indicate that Bank's funds have been diverted for Long Term Use. This is not the healthy financial practice, as the firm will always face the liquidity crises.
  3. 1. 2. 3. 4. 5. 3 The effect of increase / decrease in current assets and current liabilities on working capital is shown below: Working capital means difference between current assets and current lia bilities. Increase in current assets leads to increase in working capital. Decrease in current assets leads to decrease in working capital. Increase in current liabilities leads to decrease in working capital. Decrease in current liabilities leads to increase in working capital. The various stages in preparing Funds Flow statement are listed below. 1. 2. 3. To prepare statement of increase / decrease in Balance sheet figures. To prepare statement of changes in working capital statement. To prepare Fund Flow Statement.

Need a Tutor or Coaching Class?

Post an enquiry and get instant responses from qualified and experienced tutors.

Post Requirement

Related Study Notes

Upload Study Notes

If you have your own Study Notes which you think can benefit others, please upload on LearnPick. For each approved Study Note you will get 100 Credit Points and 100 Activity Score which will increase your profile visibility.

Upload Now
Home > Study Notes > Fund Flow Statement