The term funds may refer to either of two things:

Cash will include cash at bank, cash in hand, and perhaps short-term investments; while working capital is the excess of current assets over current liabilities.

The preparation of a fund flow statement depends on which of these meanings of the term fund is being applied.

A fund flow statement, where “fund” is taken to mean cash resources, shows the causes that lead to a movement in cash items over a given financial period. Such a fund flow statement is more commonly known as a cash flow statement.

On the other hand, a fund flow statement that is prepared based on a definition of “fund” as meaning working capital shows the causes that lead to a movement in current assets and liabilities over a given financial period.

The term fund flow statement is more commonly used for a statement that traces movements in working capital items, rather than just cash resources.

Until recently, smaller businesses (e.g., sole proprietorships and partnerships) used to prepare cash flow statements while larger businesses (e.g., joint-stock companies and, in particular, public limited companies) commonly prepare fund flow statements.

However, the present trend is to prepare cash flow statements regardless of the size of the business. In other words, fund flow statements are gradually falling out of use.

Frequently Asked Questions

Funds flow statement is also known as a?

Cash flow statement

What are the funds flow statement?

It's a financial statement that shows how a company's cash flows between its operating, investing, and financing activities. This statement can help investors understand a company's ability to generate cash and make decisions about where to allocate their capital.

Why is the funds' flow statement important?

A funds flow statement is important because it provides insights into a company's liquidity and financial health. It can help investors determine whether a company can cover its expenses, repay its debts, and make future investments.

What are some of the sources of cash listed on the funds' flow statement?

The main sources of cash listed on a funds flow statement include cash from operations, cash from investing activities, and cash from financing activities. However, there may be other sources of cash that are not listed, such as proceeds from the sale of assets.

What are the limitations of the fund flow statement?

Fund flow statement is historic in nature and shows the evaluation of a company's financial status based on its past performance. It cannot be used by itself, as it provides only information regarding the change in Working Capital; it must be used in conjunction with the balance sheet and the profit and loss account.

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