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Page 1: Fund Flow Ppt
Page 2: Fund Flow Ppt

Why we prepare fund flow statement

The balance sheet and income statement are the traditional basic financial statement of business enterprises. The serious limitation of these statement is that they don't provide information regarding the changes in the firm’s financial position during a particular period of time. They fail to answer the following questions:

Page 3: Fund Flow Ppt

Contd..

What funds are available during accounting year and for what purpose these funds were utilized.

How long term sources been adequate to finance fixed assets purchase.

Does the firm posses adequate working capital How much funds are been generated from

operations. Why did firm not pay dividend inspite of adequate

profit?

Page 4: Fund Flow Ppt

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”.

Page 5: Fund Flow Ppt

FUNDS FLOW STATEMENT

Funds flow statements is dealt by Accounting Standard 7 ..Meaning :- It explains changes in funds or changes in working capital. It explains the working capital position of the company which givesan idea to the top management about the liquidity position of thecompany.

Working capital:- It is the difference between current assets andcurrent liabilities.

Steps in preparation of funds flow statement:-

1. Preparation of working capital statement that explains increase ordecrease in working capital.

2. preparation of funds from operation statement in which we findout operating profit.

3. Preparation of funds flow statement that shows various sourcesand application of fund .

Page 6: Fund Flow Ppt

Current assetsCash in hand and bankMarketable investmentsAccounts receivables

StockPrepaid exp.

Fixed assetsGoodwill

Land and buildingPlant and machineryLong term investment

Current liabilitiesBank overdraft

Outstanding expensesAccounts payable

Fixed liabilitiesShare capital

Reserve and surplusDebentures

Long term loans

Flow in fund Not flow in funds

Page 7: Fund Flow Ppt

USES OF FUNDS FLOW

WHY THE LIQUID 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.

Page 8: Fund Flow Ppt

IN WHAT WAY THE MANAGEMENT HAS UTILIZED THE FUNDS IN THE PAST AND WHAT ARE GOING TO BE LIKELY USES OF FUNDS ?

Page 9: Fund Flow Ppt

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’

Page 10: Fund Flow Ppt

Format of Schedule of changes in Net Working Capital

Beginning year End Year Increase in C.A. &Decrease in C.L.

Decrease in C.A. &Increase in C.L.

A. Current Assets

Cash

Debtors

Bills Receivable

Stock

Prepaid Expenses

Total Current Assets

B Current Liabilities

Short term loans

Creditors

Bank overdraft

Bills payable

Outstanding expenses

Total C.L.

WORKING CAPITAL

(A-B)

Increase/Decrease in W.C.

Page 11: Fund Flow Ppt

FUND FLOW STATEMENT

SOURCES OF FUND AMOUNT USES OF FUND AMOUNT

Fund from operation

Issue of shares

Issue of debentures

Sale of fixed assets/ investment

Non trading receipts

Long term loans

Decrease in working capital

Loss from operation

Redemption of shares

Redemption of debentures

Repayment of long term loans

Purchase of Fixed Assets/ Investment

Payment of dividend and taxes

Increase in working capital

Page 12: Fund Flow Ppt

FUND FROM OPERATION

The profit made by the firm through normal operation is a major source of funds. The amount of sales as shown in P&L A/c is a source of fund by way of increase in cash, debtors, and B/R.

Page 13: Fund Flow Ppt

Profit & Loss Adjustment A/c

Particulars Amount Particulars Amount

To Depreciation

To Loss on sale of fixed assets

To Under writing commission

To Discount on issue of shares and debentures

To Preliminary Expenses written off

To Goodwill written off

To Patent or trademark

To Deferred revenue expenses

To Balance c/d

By Balance b/d

By Profit or gain on fixed assets

By Dividend received

By Interest received on investment

By Profit on revaluation of assets

FUND FROM OPERATION

Page 14: Fund Flow Ppt

NUMERICAL

From the following information prepare schedule of changes in net working capital for the year ended on 31st dec,2008

Particulars 1-1-2008 31-12-2008

Cash

Bank

Debtors

Bills Receivable

Stock

Creditors

Outstanding Expenses

10,000

40,000

25,000

5,000

22,000

10,000

2,000

12,000

30,000

45,000

2,000

22,000

8,000

2,500

Page 15: Fund Flow Ppt

NUMERICAL

From the following information prepare schedule of changes in net working capital for the year ended on 31st March, 2009

Particulars 31-03-2008 31-03-2009

Bank overdraft

Creditors

Bank Loan

Cash

Debtors

Stock

Proposed Dividend

____

3,10,000

1,00,000

30,000

2,10,000

2,00,000

45,000

5,000

2,90,000

75,000

10,000

1,80,000

2,25,000

60,000

Page 16: Fund Flow Ppt

NUMERICAL

From the following information of M/s XYZ Ltd. Prepare a Schedule of Changes in Net Working Capital and Fund Flow Statement

LIABILITIES 2008 2009 ASSETS 2008 2009

Share Capital

Reserves & Surplus

Debentures

Creditors

Unclaimed Dividends

30,000

14,000

5,000

11,000

---

______60,000

36,000

19,000

--

9,000

1,000

______65,000

Plant

Machinery

Stock

Debtors

Cash

6,000

25,000

12,000

15,000

2,000

______

60,000

5,000

20,000

18,000

19,000

3,000

______

65,000

Page 17: Fund Flow Ppt

Cash Flow Statement

MEANING:- It is the statement depicting change in cashpossession from one period to another. It explains the reasons forinflows or out flows of cash.

Steps in prepration Statement of cash from operation in this we will find out the

cash profit of the company Preparation of cash flow statement in which we will explain

various in flows and out flows of cash. Here we will take theopening cash balance of the company and add variousinflows to it and deduct various outflows. Finally we will getthe closing cash balance of the company.

Uses of Cash Flow Statement:

Helps in efficient cash management Helps in Internal Financial Management Discloses the movement of cash Discloses success or failure of cash planning.

Page 18: Fund Flow Ppt

Cash Flow AnalysisCash 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.

Page 19: Fund Flow Ppt

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.

Page 20: Fund Flow Ppt

449.36Cash From Operations

  

43.19Profit on sold Assets

  

 (Less) Non-cash Incomes

  

80.80Provisions

33.86Amortizations

12.52Interest Payable

35.15Depreciation

  

 (Add) Non-cash Expenses

330.22Net Profit Before Tax

Statement Of Cash From Operations

Page 21: Fund Flow Ppt

5684.13 5684.13 

    

1194.80Trade And Other Receivables  

593.61Closing Cash Balance449.36Cash From Operations

12.52Interest Paid2253.02Long Term Borrowings

529.80Purchase Of Investments42.85Sale Of Investments

32.91Purchase Of Fixed Assets43.50Sale Of Fixed Assets

2.80Payments For Extraordinary Items1220.34Deposits

137.00Direct Taxes Paid1119.70Trade Payables

3180.69Advances555.36Opening Cash Balance

    

 Outflow Of Cash Inflow Of Cash

Cash Flow Statement