Divine Purpose Of Fund Flow Statement

A fund flow statement is a revelation of the types of inflowsoutflows experienced by the firm.

Purpose of fund flow statement. Fund Flow Statement is significant as it analyzes the adjustments in financial position of an organization featuring the sources and applications of its funds. It offers valuable information in regards to the companys working funding and investing activities within a particular period. The main purpose of preparing a Fund Flow Statement is that it reveals clearly the important items relating to sources and applications of funds of fixed assets long-term loans including capital.

Numerical on funds flow statements. The fund flow statement is able to identify the sources of cash and their uses and the cash flow statement starts with looking at the current level of cash and how it leads to the closing balance. It is a place where information about any fund flow operation that might be out of the ordinary such as a higher than expected outflow due to an unusual cost is presented.

Fund flow statement is useful in knowing the changes in the structure of assets liabilities and capital. It shows whether the sources of funds coincides with its application and indicates the accuracy of a firms financing and investment decisions. The company not generating the same amount of cash as competitors will eventually lose out when time gets rough.

What is the amount of redemption for the purpose of funds flow statement. It also informs how far the assets derived from normal activities of business are being utilised properly with adequate consideration. It highlights the financing pattern of the expansion of the firm.

Sources of funds and applications of funds for a particular period. In other words it compares the source of inflow and outflow of funds during the concerned accounting period and analyses how it affects the working capital of an organization. A fund flow statement is a statement prepared to analyse the reasons for changes in the financial position of a company between two balance sheets.

The financial resources of the company are analyzed in detail and disclose the changes made. The following are the uses significance or benefits of funds flow statement. The primary purpose of a fund flow statement is to explain the net change in working capital it will be better to prepare first the schedule of changes in working capital before preparing a fund flow statement.