Cash Flow and Fund Flow

7/29/2019 Cash Flow and Fund Flow

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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)

Cash Flow and Fund Flow

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