Funds Flow Analysis from Financial Books
The fund flow occurs in a business when a transaction results in a change in the amount of fund. We can say it is a technical device which designed to highlight the changes in the financial condition of a business enterprise between two balance sheets.
Objectives of Funds Flow Analysis
Meaning of fund flow statement
Objectives of Fund Flow statement
Compute Fund from Operations
Here we will take a definition from Robert Anthony about fund flow, “the Fund Flow Statement describes the sources from which additional funds were derived and the uses to which these funds were put.”
Fund Flow Statement known as different names also:
Fund Statement
A Statement of sources and uses of fund
A statement of sources and application of fund
Where got and where gone statement
Inflow and outflow of fund statement
Main objectives of fund flow statements are:
Helping to understand the changes in assets and asset sources which are not readily evident in the income statement or financial statement
To inform as to how the loans to the business have been used
To Point out the financial strength and weaknesses of the business
In the steps of fund flow statement preparation, involves:
Changes in working capital (taking current items only)
Adjustment of profit and loss account
Preparation of accounts for no-current items
At last we can say it was easy methods of Funds Flow Analysis after having study the chapter of Financial Statement analysis. I will further discuss it with some examples also in the financial blog.
