The Fund Flow Statement is a financial document that provides insights into the sources and uses of funds within a company over a specific period. Its uses include:
- Understanding Liquidity: The statement helps in assessing the liquidity position of a company by showing how funds have been generated and utilized. It highlights changes in the working capital and provides insights into the company’s ability to meet short-term obligations.
- Financial Analysis: It assists in analyzing the financial health of a company by revealing the net inflow and outflow of funds. This information is crucial for evaluating the efficiency of operations and financial management.
- Investment Decisions: Investors use the fund flow statement to understand how a company manages its finances. It helps in evaluating the company’s ability to generate cash and fund its operations, which is critical for making informed investment decisions.
- Planning and Control: Management uses the statement for budgeting and forecasting. It aids in planning for future cash needs and controlling the use of funds to ensure alignment with financial goals.
- Credit Analysis: Lenders and creditors use the statement to assess the company’s creditworthiness. It provides insights into the company’s ability to generate funds to repay loans and manage debt effectively.
Overall, the fund flow statement is a vital tool for financial analysis, planning, and decision-making.
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