Question based on UPES Solved Assignment and other course
Answer:
Generally the fund flow statement provides the information about the different sources and application of fund during the particular period. The main objectives of fund flow statement are:
- The basic object of preparing the statement is to have a rich into the financial operations of the concern. It analyses how the funds were obtained and used in the past.
- One important object of the statement is that it evaluates the firm ’financing capacity. The analysis of sources of funds reveals how the firm’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.
- To provide the information about the important items like fixed assets, long term loans, capital etc., relating to sources and applications of fund.
- To provide the information about the difference sources of fund, i.e., how much fund is being collected from the issuing shares or debenture, how much from long term or short term loans, how much from disposal of fixed assets and how much from operational activities?
- To help to understand the changes in assets and asset sources which are not readily evident in the income statement or financial statement.
- To inform as to how the loans to the business have been used.
- To point out the financial strengths and weaknesses of the business.
