Description
Highlighting what is cash flow, classfies cash flow into cashflow from operating activities, investing activities and financing activities. It also explains information required which is required for preparing cash flows.
FUND FLOW & CASH FLOW
Cash Flow-Definition
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It provides information about the cash receipts & payments of a firm for a given period.
?
It’s a statement that shows how changes in balance sheet accounts and income affect cash & cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
?
The cash flow statement is concerned with the flow of cash in and cash out of the business.
Classification of Cash Flows
Cash Flows from operating activities:-Operating activities are the
principal revenue-producing activities of the enterprises & other activities that are not investing & financing activities. Some examples of cash flows from operating activities are:
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Cash receipts from sale of goods;
?
Cash receipts from royalties;
Cash payment to & behalf of employees; Cash payments to suppliers for goods & Services.
?
?
Cash Flows from Investing Activities:-This are the acquisition &
disposal of long-term assets & other investment not included in cash Equivalence. Some Examples of Cash Flows from investing activities are;
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Cash payments to acquire fixed assets; Cash receipts from disposal of fixed assets; Cash advances & loan made to third party Cash payment to acquire share or debt of other enterprise
?
?
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Cash Flow From Financing Activities:- This are the activities that
result in changes of size & composition of owner’s capital & borrowings of the Enterprise . Some Examples of Cash flow from financing activities are:
?
Cash proceeds from issuing of shares or other similar instruments; Cash proceeds from issuing debenture, loan notes and bonds; Cash repayments of amount borrowed; Payment of Dividend;
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?
?
Information required for Cash Flows
?
Comparative Balance Sheets:-
Balance sheet at the beginning & at the end of the accounting period indicate the amount of changes that have taken place in assets, liabilities & capital.
?
P & L Account: The P & L account of the current Period enables to determine
the amount of cash provided by or used in operations during the accounting period after making adjustments for non-cash, current assets & current liabilities.
?
Additional Data:- In addition to the above statements, additional data are
collected to determine how cash has been provided or has been used.
USES OF CASH FLOW STATEMENT
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Helps is efficient Cash Management; Helps in internal financial Management; Discloses the movement of cash;
?
?
?
Discloses the success or failure of cash planning;
Helps to determine the likely flow of cash; Better tool of Analysis.
?
?
Limitations of Cash Flows
?
Misleading Inter-Industry comparison; Misleading comparison over a period of time; Misleading Inter-Firm Comparison;
?
?
?
Influenced by changes in Management policy;
Cannot be equated with Income Statement; Not a replacement of other Statements.
?
?
Fund Flow-Definition
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Statement is valuable in interpretation of accounts.
?
This Statement contains all the details of financial resources which have become available during an accounting period & the ways in which those resources have been used up. This statement disclosed the amount raised from various sources of finance during a period & then explains how that finance has been used in business. The statement analyses the changes between opening & closing balance sheets for the period. This statement analyses changes which took place in assets & liabilites in a given period of time.
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?
?
Fund & Flow
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Broadly the term fund refers to all the financial resources of the company .On the other extreme fund has been understood as Cash only. However the most acceptable meaning of fund is working capital. Working Capital is the Excess of current assets over current liabilities. Flow of funds means the movement of funds which causes change in working capital of the organization. To understand Fund Flow statement it is necessary to differentiate between Current Assets & Non-Current Assets.
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?
?
?
General Rule
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Transactions which involve only current assets do not result in flow. Transaction which involve only non current assets do not result in flow. Transaction which involve one current asset & one non-current liabilities results in flow
?
?
Basic Rule in preparation of fund flow statement
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An increase in an asset over a year is an application of funds.
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An decrease in an assets over the year is a source of funds.
?
A decrease in a liability over the year is an application of fund.
?
An increase in a liability over the year is an sources of funds.
Sources Of Funds:
?
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Funds Generated From Operation
uring the course of trading activity, a company generates revenue mainly in the form of sale proceeds & paid out for costs.
The difference between these two items will be the amounts of funds generated by trading operations.
?
?
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Funds From Shares , Debentures & long–term Loans:The long-term funds injected into business during the year by issue of new shares or debentures and by raising long-term loans. If any premium is collected, that is also form part of funds raised from the above said sources of finance.
?
?
Sale of Fixed Assets & long-term investments:
Any amount generated from sale of fixed assets or long term investments is a source of funds . While preparations of the fund flow statement the gross sale proceeds from sale is taken as source of funds.
This activity does nit produce fresh funds, but it releases funds used to finance the assets .
?
?
Any profit or loss arising from such sale is adjacent in the funds generated from operations.
Application Of funds
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Repayment of preference share capital or debenture or long-term. Purchase of Fixed assets or long-term Investments. Distribution of Dividend & payment of taxes. Loss from operations.
?
?
?
Uses of Fund Flow
?
To determine financial consequences of operations.
?
To Fill Financial Blind spots.
Working Capital Utilization. To Aid In Securing New Finance.
?
?
?
Help In Allocation of Financial Resources.
Helps in Deciding the Urgency of Problem. Helps in Evaluation of Operational Issues.
?
?
DRAWBACKS
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Historical Nature. Structural Change are not Disclosed. New Items are Not Disclosed. Not Relevant. Not Fool Proof.
?
?
?
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doc_493818251.pptx
Highlighting what is cash flow, classfies cash flow into cashflow from operating activities, investing activities and financing activities. It also explains information required which is required for preparing cash flows.
FUND FLOW & CASH FLOW
Cash Flow-Definition
?
It provides information about the cash receipts & payments of a firm for a given period.
?
It’s a statement that shows how changes in balance sheet accounts and income affect cash & cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
?
The cash flow statement is concerned with the flow of cash in and cash out of the business.
Classification of Cash Flows
Cash Flows from operating activities:-Operating activities are the
principal revenue-producing activities of the enterprises & other activities that are not investing & financing activities. Some examples of cash flows from operating activities are:
?
Cash receipts from sale of goods;
?
Cash receipts from royalties;
Cash payment to & behalf of employees; Cash payments to suppliers for goods & Services.
?
?
Cash Flows from Investing Activities:-This are the acquisition &
disposal of long-term assets & other investment not included in cash Equivalence. Some Examples of Cash Flows from investing activities are;
?
Cash payments to acquire fixed assets; Cash receipts from disposal of fixed assets; Cash advances & loan made to third party Cash payment to acquire share or debt of other enterprise
?
?
?
Cash Flow From Financing Activities:- This are the activities that
result in changes of size & composition of owner’s capital & borrowings of the Enterprise . Some Examples of Cash flow from financing activities are:
?
Cash proceeds from issuing of shares or other similar instruments; Cash proceeds from issuing debenture, loan notes and bonds; Cash repayments of amount borrowed; Payment of Dividend;
?
?
?
Information required for Cash Flows
?
Comparative Balance Sheets:-
Balance sheet at the beginning & at the end of the accounting period indicate the amount of changes that have taken place in assets, liabilities & capital.
?
P & L Account: The P & L account of the current Period enables to determine
the amount of cash provided by or used in operations during the accounting period after making adjustments for non-cash, current assets & current liabilities.
?
Additional Data:- In addition to the above statements, additional data are
collected to determine how cash has been provided or has been used.
USES OF CASH FLOW STATEMENT
?
Helps is efficient Cash Management; Helps in internal financial Management; Discloses the movement of cash;
?
?
?
Discloses the success or failure of cash planning;
Helps to determine the likely flow of cash; Better tool of Analysis.
?
?
Limitations of Cash Flows
?
Misleading Inter-Industry comparison; Misleading comparison over a period of time; Misleading Inter-Firm Comparison;
?
?
?
Influenced by changes in Management policy;
Cannot be equated with Income Statement; Not a replacement of other Statements.
?
?
Fund Flow-Definition
?
Statement is valuable in interpretation of accounts.
?
This Statement contains all the details of financial resources which have become available during an accounting period & the ways in which those resources have been used up. This statement disclosed the amount raised from various sources of finance during a period & then explains how that finance has been used in business. The statement analyses the changes between opening & closing balance sheets for the period. This statement analyses changes which took place in assets & liabilites in a given period of time.
?
?
?
Fund & Flow
?
Broadly the term fund refers to all the financial resources of the company .On the other extreme fund has been understood as Cash only. However the most acceptable meaning of fund is working capital. Working Capital is the Excess of current assets over current liabilities. Flow of funds means the movement of funds which causes change in working capital of the organization. To understand Fund Flow statement it is necessary to differentiate between Current Assets & Non-Current Assets.
?
?
?
?
General Rule
?
Transactions which involve only current assets do not result in flow. Transaction which involve only non current assets do not result in flow. Transaction which involve one current asset & one non-current liabilities results in flow
?
?
Basic Rule in preparation of fund flow statement
?
An increase in an asset over a year is an application of funds.
?
An decrease in an assets over the year is a source of funds.
?
A decrease in a liability over the year is an application of fund.
?
An increase in a liability over the year is an sources of funds.
Sources Of Funds:
?
?
Funds Generated From Operation
uring the course of trading activity, a company generates revenue mainly in the form of sale proceeds & paid out for costs.The difference between these two items will be the amounts of funds generated by trading operations.
?
?
?
Funds From Shares , Debentures & long–term Loans:The long-term funds injected into business during the year by issue of new shares or debentures and by raising long-term loans. If any premium is collected, that is also form part of funds raised from the above said sources of finance.
?
?
Sale of Fixed Assets & long-term investments:
Any amount generated from sale of fixed assets or long term investments is a source of funds . While preparations of the fund flow statement the gross sale proceeds from sale is taken as source of funds.
This activity does nit produce fresh funds, but it releases funds used to finance the assets .
?
?
Any profit or loss arising from such sale is adjacent in the funds generated from operations.
Application Of funds
?
Repayment of preference share capital or debenture or long-term. Purchase of Fixed assets or long-term Investments. Distribution of Dividend & payment of taxes. Loss from operations.
?
?
?
Uses of Fund Flow
?
To determine financial consequences of operations.
?
To Fill Financial Blind spots.
Working Capital Utilization. To Aid In Securing New Finance.
?
?
?
Help In Allocation of Financial Resources.
Helps in Deciding the Urgency of Problem. Helps in Evaluation of Operational Issues.
?
?
DRAWBACKS
?
Historical Nature. Structural Change are not Disclosed. New Items are Not Disclosed. Not Relevant. Not Fool Proof.
?
?
?
?
doc_493818251.pptx