fund flow statement2
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Liquidity refers to resources currently available with the firm. It is
reflected by the funds or cash flows rather than just the stock of
current assets and liabilities.
Funds flow is a change in a firms net current assets. Funds or cash
flows occur due to changes in items in the balance sheet and profit &
loss statement. Thus liquidity analysis involves measurement of
changes in assets, liabilities and equity.
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Current Assets means all the assets that can beconverted into cash within one working year Eg of CAare Cash Bills Receivables Debtors Inventory Prepaid Expenses
Current liabilities means which the firm has to paywithin one working year Creditors
Bills Payable Proposed Dividend Outstanding Expenses
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Total Resource Basis
Working capital Basis
On the basis of Cash
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Sources of Funds Uses of fundsIncrease in Capital or Liabilities Decrease or payment of
Liabilities & capital
Sale or decrease in Assets Increase or purchase of assets
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(Rs 000)
19X1 19X2 ChangeASSETS
Cash 54 135 81
Debtors 6,750 8,235 1,485
Stock (inventory) 10,125 22,680 12,555
Total current assets 16,929 31,050 14,121
Fixed assets (net) 2,970 6,075 3,105
Other assets 945 1,890 945Total Assets 20,844 39,015 18,171
LIABILITIES & NET WORTH
Bank borrowing 3,510 8,664 5,154
Creditors 2,835 6,615 3,780
Provision for taxes 270 972 702
Accrued expenses 810 2,700 1,890
Total current liabilities 7,425 18.951 11,526Long-tenn debt 1,944 1,404 -540
Total liabilities 9,369 20,355 10,986
Paid-up share capital 8.37 8,370
Reserves and surplus 3,105 10,290 7,185
Total Liabilities 20,844 39,015 18,171
TABLE 1. ABC Co.: Balance Sheet Changes,
March 31,19Xl-March 31, 19X2
Changes in the financial position of the firm
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hange in shortterm element hange in long termelementChange in shortterm element No Flow of fund Flow of fund
Change in long termelement Flow of fund No flow of fund
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It has three major parts
Statement of changes in Working Capital
Fund From Operations
Fund Flow Statement: Statement showing sources &
uses of funds
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Funds flow from operations+ PAT (loss)
+ Depreciation/ amortization
+ Non-Operating expenses (e. g. Loss from thesale of fixed assets, interest paid..)
Non-operating incomes (e.g. Gain from the saleof fixed assets)
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Sources of funds or cash flows: funds from operations
sale of fixed assets
issue of share capital
borrowings
Uses of funds are: losses
purchase of fixed assets
repayment of borrowings payment of dividends
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Analysis of Financial Position Evaluation of Firms Financing
An instrument for Allocation of Resources
A tool of Communication to outside World Future Guide
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