cash flow and fund flow
Post on 03-Apr-2018
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Lifeblood of Business.
Sales, debtors, assets, investors
Salaries, rent, dividends, interest
Inflow & outflow of cash: particular period
Objectives: Causes of changes in cash balance
Factors contributing to reduction of cash balance
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Projects rate of return or value
Problems with business liquidity Alternative measure of businesss profits
Evaluate the quality of income
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Reasons for low cash balance
Major sources & use
Short term financial decision
Reference
Management
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Cash Flow From Operating Activities
Direct method or indirect method
Cash Flow from investing activities
Cash Flow from financing activities
Total (positive or negative) cash flow is added
to beginning cash balance and should result in
ending cash balance
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Current assets
except Marketable securities and s-term notes
receivable which are investing
Current Liabilities
except s-t notes payable which are financing
Revenue and Expenses (includes interest
expense and revenue, and dividends received)
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Short-term and long-term investments
Short-term and long term notes receivable Property, Plant and Equipment (depreciation
affects operating activities)
Intangible Assets
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Short-term and long-term loans
Capital Stock and Paid in Capital in excess of par Retained earnings (net income aspect is operating)
Dividends Paid
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Description Amount ($) Total ($)Cash flow from Operations + 10
Sales (in cash) +30
Materials -10
Labor -10
Cash flow from Financing +40
Incoming Loan +50
Loan repayment -5Taxes -5
Cash flow from Investments -10
Purchased capital -10
Total +40
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Cash Fund
Capital Fund
Net working Capital
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Flow refers to changes or transfer & therefore the flow offunds means transfer of economic values from one asset to
another, from one liability to another, from one asset to
liabilities or vice-versa or a combination of these.
The increase or decrease in net working capital will take
place only when one account, out of two accounts to be
affected in a transaction ,is a current account and the other
account is non current account.
When a change in non current account is followed by a
change in another non current account, it does not amount to
flow of fund.
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The funds-flow-statement is a report on financial
operations changes, flow or movements during the
period.
It is a statement, which shows the sources and
application of funds or it shows how the activities
of a business is financed in a particulate period.
Statement shows how the financial resources have
been used during a particular period of time.
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One important use of the statement is that it
evaluates the firms financing capacity.
The analysis of sources of funds reveals how thefirm's financed its development projects in the past
i.e., from internal sources or from external sources. It also reveals the rate of growth of the firm.
It serves the following major purposes :
An Instrument for Allocation of Resources
A Tool of Communication to Outside World
Future Guide
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Concept
Basis of presentation
Working capital
Usefulness
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Presented By:Annirudha Agnihotri (65)Jacob Joseph (75)Renita Miranda (85)Avinash Rao (95)Abhishek Shetty (105)Leena Jadhav (115)
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