
FUNDS : WORKING CAPITAL

FLOW OF FUNDS: THE TERM FLOW MEANS
CHANGE AND THEREFORE THE TERM FLOW OF
FUNDS MEANS “CHANGES IN FUNDS” OR
“CHANGES IN WORKING CAPITAL”. IN OTHER
WORDS, ANY INCREASE OR DECREASE IN
WORKING CAPITAL MEANS “FLOW OF FUNDS”.
FU N DS FLOW STATEM ENT
F u n d s flo w statem en ts is d ealt b y A cco u n tin g S tan d ard 7 .
.
M ea n in g :- It ex p lains ch ang es in fun d s o r ch an g es in w o rk ing cap ital
. It ex p lain s th e w o rk in g cap ital p o sitio n o f the co m p any w h ich g ives
an id ea to th e top m an ag em en t abo u t the liq u idity p ositio n o f th e
co m p an y .
W o rk in g ca p ita l:- It is th e d ifferen ce b etw een cu rrent assets an d
cu rren t liab ilities.
S tep s in p rep aratio n o f fu nd s flo w statem en t:1 . P rep aration o f w o rk in g capital statem en t th at ex p lain s in crease o r
d ecrease in w o rk in g capital.
2 . p rep aratio n o f fun d s fro m o p eratio n statem en t in w h ich w e fin d
o u t o p eratin g p ro fit.
3 . P rep aratio n o f fu n ds flo w statem ent th at sh o w s v ario u s sou rces
an d ap plication o f fu n d .
Current assets
Cash in hand and bank
Marketable investments
Accounts receivables
Stock
Prepaid exp.
Fixed assets
Goodwill
Land and building
Plant and machinery
Long term investment
Current liabilities
Bank overdraft
Outstanding expenses
Accounts payable
Fixed liabilities
Share capital
Reserve and surplus
Debentures
Long term loans
Flow in fund
Not flow in funds
USES OF FUNDS FLOW
 WHY THE LIQUED POSITION OF THE BUSINESS




BECOMING MORE AND MORE UNBALANCED IN
SPITE OF COMPANY IS MAKING MORE AND MORE
PROFITS.
WHERE HAVE THE PROFIT GONE
WHAT WILL BE THE SOURCES FOR DIVIDEND IF
COMPANY IS NOT EARNING SUFFICIENT PROFIT
WHAT ARE THE SOURCES OF REPAYMENT OF THE
LOAN TAKEN
HOW MUCH FUNDS GENERATION THROUGH
NORMAL BUSINESS OPERATION.
 IN WHAT WAY THE MANAGEMENT HAS UTILIZED
THE FUNDS IN THE PAST AND WHAT ARE GOING
TO BE LIKELY USES OF FUNDS ?
Funds flow Analysis
This statement is based on the ‘working Capital’ concept of
funds.
It measures the inflows and outflows of working capital
resulting from different transactions.
Funds flow statement measures and presents in an analytical
manner the summarized version of the numerous flows of funds
for a specific period.
‘Funds Flow’ is the change in ‘Working Capital’
Schedule Of Changes In Working Capital
Current assets
2004
2005
Increase
Decrease
Cash & bank bal.
593.61
555.36
38.25
Investments
3404.4
2917.5
486.95
Loans & adv.
9836.5
6696.6
3139.9
Bills receivables
1522.9
302.3
1220.6
Total
15357
10472
1767.5
576.72
1190.75
1881
1236
645.02
Bills for collections
4522.2
4477.4
44.85
Total
8170.7
6290.1
CA - CL
7186.7
4181.7
Current liabilities
Other liabilities
Short term borrowings
Increase In Working Capital
TOTAL
3005
7186.7
7186.7
3005.02
4885.6
4885.64
CALCULATION OF FUNDS
FROM OPERATION
Closing Balance Of P&L A/c
343.31
(+) Non Fund Items
Depreciation On Fixed Assets
Transfer Of R/S
2.56
195.23
197.79
541.1
(-) NON FUND CR.
NIL
OPENING BAL. OF P&L A/C
321.03
FUNDS FROM OPERATION
220.07
Funds Flow Statement
SOURCES
ISSUE OF CAPITAL
FUNDS FROM OPERATION
SALE OF FIXED ASSET
LONG TERM LOANS
BORROWINGS
TOTAL
AMT.
APPLICATION
49 Increase In WC
220.07 Investments
AMT.
3005.02
486
2.56
2253.02
966.37
3491.02
3491.02
C a sh F lo w S ta te m e n t
M E A N IN G :- It is th e sta te m e n t d e p ic tin g c h a n g e in c a sh
p o sse ssio n fro m o n e p e rio d to a n o th e r. It e x p la in s th e re a so n s fo r
in flo w s o r o u t flo w s o f c a sh .
S te p s in p re p ra tio n
 S ta te m e n t o f c a sh fro m o p e ra tio n in th is w e w ill fin d o u t th e
c a sh p ro fit o f th e c o m p a n y
 P re p a ra tio n o f c a sh flo w sta te m e n t in w h ic h w e w ill e x p la in
v a rio u s in flo w s a n d o u t flo w s o f c a sh . H e re w e w ill ta k e th e
o p e n in g c a sh b a la n c e o f th e c o m p a n y a n d a d d v a rio u s
in flo w s to it a n d d e d u c t v a rio u s o u tflo w s. F in a lly w e w ill g e t
th e c lo sin g c a sh b a la n c e o f th e c o m p a n y .
U se s o f C a sh F lo w S ta te m e n t:




H e lp s in e ffic ie n t c a sh m a n a g e m e n t
H e lp s in In te rn a l F in a n c ia l M a n a g e m e n t
D isc lo se s th e m o v e m e n t o f c a sh
D isc lo se s su c c e ss o r fa ilu re o f c a sh p la n n in g .
Cash Flow Analysis
Cash flow includes cash inflows and outflows –
cash receipts and cash payments during a period.
A cash flow statement is a statement which portrays
the changes in cash position between two
accounting periods.
It helps in taking short term financial decisions and
also in the preparation of cash budget for the next
year.
How Cash Flow Differ From
funds Flow ?
Unlike funds flow Cash Flow does
not has non-cash items.
It comprises only those entries in
which cash has come in or gone out.
Statement Of Cash From Operations
Net Profit Before Tax
330.22
(Add) Non-cash Expenses
Depreciation
35.15
Interest Payable
12.52
Amortizations
33.86
Provisions
80.80
(Less) Non-cash Incomes
Profit on sold Assets
Cash From Operations
43.19
449.36
Cash Flow Statement
Inflow Of Cash
Opening Cash Balance
Outflow Of Cash
555.36
Advances
Trade Payables
1119.70
Direct Taxes Paid
Deposits
1220.34
Payments For Extraordinary Items
3180.69
137.00
2.80
Sale Of Fixed Assets
43.50
Purchase Of Fixed Assets
32.91
Sale Of Investments
42.85
Purchase Of Investments
529.80
Long Term Borrowings
2253.02
Cash From Operations
449.36
Interest Paid
Closing Cash Balance
Trade And Other Receivables
5684.13
12.52
593.61
1194.80
5684.13