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Fund Flow Analysis

Fund Flow Analysis

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Published by Bikash Roy

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Published by: Bikash Roy on Sep 07, 2010
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Fund flow analysis



Fund means working capital i.e., the differences between the current assets and current liabilities. The term flow denotes the change. Flow of funds means the change in funds or in working capital (gross and net). Objectives of fund flow statement analysis: (1) It pinpoints the mobilization of resources and the further utilization of resources (2) It highlights the financing of the general expansion of the business firms (3) It exemplifies the utilization of debt finance in the structure of financing (4) It portrays the relationship between the financing, investment, liquidity and dividend decision of the firm during the given point of time.

.  Last step is the preparation of fund flow statement . to identify the flow of fund / movement of fund through the detection of changes in the volume of working capital.METHODS OF PREPARING FUND FLOW STATEMENT Steps in the preparation of Fund Flow Statement:  l First and fore most method is to prepare the statement of changes in working capital i.e.  Second step is is the preparation Adjusted Profit& Loss A/c.

Particulars Previous Current Year Year Increase In Working Capital (+) Decrease in In Working Capital ( ) (A) Current Assets: Cash In Hand Cash at Bank Marketable Securities Bills Receivable Sundry Debtors Closing Stock Prepaid Expenses (B) Current Liabilities: Creditors Bills Payable Outstanding expenses Pre received Income Provision for doubtful and bad debts Net Working Capital (A(A-B) Increase/Decrease Working Capital .

Adjusted Profit & Loss A/c To Depreciation To Goodwill Written off To Patent Written off To Loss on Sale of Fixed Asset To Loss on Sale of Investment To Loss on redemption of Liability To Preliminary Expenses off To Proposed Dividend To Transfer to General Reserve To Current Year By Opening Balance Profit By Profit on sale of Fixed Assets By Profit on Sale of Investments By Profit on redemption of liability By Transfer from General Reserve By Balancing Figure Fund From Operations (FFS) .

The proforma of the fund flow Fund Flow Statement Analysis Sources of funds yFunds from Business Operation yNon trading Incomes ySale of Non-Current Assets NonySale of Long Term Investments yIssue of shares yAcceptance of deposits yLong Term Borrowings yDecrease in Working Capital Uses of funds Funds Lost in Operations yRedemption of Preference Share Capital yRepayment of Loans yPurchase of Long Term Investments yPurchase of Fixed Assets yPayment of Taxes yPayment of Dividends yDrawings .

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