cash and fund flow

7/30/2019 cash and fund flow

1/19


2/19

Assets are always equal to

equity and liabilities:

Assets = Equity +

Liabilities


3/19

Cash and bank balance

Accounts receivable

(debtors)

Inventory (stocks)

Advances to suppliers

Prepaid expenses

Current Assets


4/19

Tangible fixed assets are

physical assets likeplant.

Intangible fixed assetsare the firms rights andclaims, such as patents,

copyrights, goodwill etc.Gross block represent all

tangible assets atacquisition costs.

Net block is gross blocknet of depreciation.

Fixed Assets


5/19

Current liabilities

Accounts payable(creditors)

Outstanding expenses

Advances fromcustomers

Provision for tax

Provision for dividend

Long-term liabilities

Borrowings fromfinancial institutionsand banks etc.

Debentures/bonds:

Non-convertible

Fully convertible

Partly convertible

Liabilities


6/19

Revenue is the amount received or receivable within the

accounting period from the sale of the firms goods or

services.

Operating revenue is the one that arises from main

operations of the firm, and the revenue arising from other

activities is called non-operating revenue.


7/19

Examples: rawmaterial consumed,salary and wages,power and fuel,repairs and

maintenance, rent,selling and marketingexpenses,administrative

expenses.

Expense


8/19


9/19

Depreciation is a charge for the

use of fixed assets; it is anexpense.

It is a non-cash expense since

cash was paid at the time fixed

assets were acquired.

Expenditures incurred onacquiring assets are called

capital expenditures.

Depreciation is allocation of

these expenditures over the life

of assets that have helped ingenerating revenue.


10/19

Accounting profit is a result

of the arbitrary allocation

of expenditures between

expenses (revenue

expenditure) and assets

(capital expenditure).Economic profit is the net

increase in the wealth of

the firm, and it is

measured in cash flow.


11/19

Funds flow is a change in afirms net current assets while

cash flow is a change in the

firms cash position.

Funds or cash flows occur due

to changes in items in thebalance sheet and profit & loss

statement.

liquidity analysis involves

measurement of changes in

assets, liabilities and equity.


12/19

What funds wereavailable during theaccounting periodand for what purpose

these funds wereutilized?

Have long termsources beenadequate to financefixed asset purchase?

Does the firmpossess adequateworking capital?

How much fundshave been generatedfrom operations?

Why did the firm notpay dividend in spiteof adequate profit?


13/19

Sources of funds or cash flows:

funds from operations

sale of fixed assets

issue of share capital

borrowings

Uses of funds are:

losses

purchase of fixed assets

repayment of borrowings

payment of dividends

Sources and Uses of Funds and Cash Flows

13


14/19

Funds flow from operations

+ PAT ( loss)

+ Depreciation

+ Other non-cash expenses

Non-cash incomes

+ Loss from the sale of fixed assets Gain from the sale of fixed assets

Funds fromOperations

14


15/19

Liquidity position

Capital expenditures

Dividends paid

Retained earnings

External financing

Repayment of loansNon-performing assets

Uses of Funds and Cash Flow Statements

15


16/19

The increase or decrease in networking capital will take place onlywhen one account, out of twoaccounts to be affected in atransaction ,is a current accountand the other account is noncurrent account


17/19

Statement or Schedule ofChanges in Working

Capital. Statement of Sources and

Uses of Funds or FundsFlow Statement


18/19

Item

(A) CurrentAssetsCash at bank

Cash in hand

Stock in trade

Debtors

Bills receivable

Advance payment

Short term investment

Prepaid expenseAccrued income

Total (A)

(B) Current Liabilities

(1) Short term loans

(2) Bank overdraft

(3) Creditors

(4) Bills payable

(5) Outstanding expenses

(6) Unclaim dividend

Total (B)

Net Working Capital (A-B)

Increase / Decrease in Working Capital

Total

Previous Year Current Year Effect on

Increase Rs.

Working

captial

Decrease Rs.

Statement or Schedule of Changes in Working Capital.


19/19

Sources of Fund Amount

Fund from operation

Issue of share

Issue of debenture

long term loansSale of fixed assets /

Investment

Non trading receipts

Decrease in working

capital

(if any)

Uses Of Funds Amount

Loss from operation

Redemption of

preference shares

Redemption ofdebentures

Repayment of

long term loans

Purchase of fixed assets

/ Investments

Payment of dividend & taxesIncrease in working capital

(if any)

cash and fund flow

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