Page 102 - DCOM302_MANAGEMENT_ACCOUNTING
P. 102
Unit 5: Fund Flow Statement
13. The redemption bank term loan leads to change in the Notes
(a) Non-current liability account and current asset account
(b) Current asset account and current liabilities account
(c) Non-current asset account and current liabilities account
(d) Non-current asset account and current liabilities account
14. Flow of funds means the change in
(a) funds (b) working capital
(c) either (d) both
15. Which of the following is not an objectives fund-fl ow analysis?
(a) It pinpoints the mobilization of resources and the further utilization of resources
(b) It highlights the financing of the general expansion of the business fi rms
(c) It exemplifies the utilization of debt finance in the structure of fi nancing
(d) None of these.
16. Which of the following is not a source of fund?
(a) Purchase of Long-term Investments
(b) Acceptance of deposits
(c) Sale of Non-current Assets
(d) Decrease in Working Capital
5.5 Summary
Fund flow statements summarize a fi rm's inflow and outflow of funds.
Simply put, it tells investors where funds have come from and where funds have gone.
The statements are often used to determine whether companies efficiently source and
utilize funds available to them.
Fund flow statements are prepared by taking the balance sheets for two dates representing
the coverage period.
The increases and decreases must then be calculated for each item. Finally, the changes are
classified under four categories: (1) Long-term sources, (2) Long-term uses, (3) Short-term
sources and (4) Short-term uses.
It is also important to zero out the non-fund based adjustments in order to capture only the
changes that are accompanies by flow of funds.
However, income accrued but received and expenses incurred but not received reckoned
in the profit and loss statement should not be excluded from the profi t figure for the fund
fl ow statement.
Fund flow statements can be used to identify a variety of problems in the way a company
operates.
Meanwhile, a company that is using long-term money to finance short-term investments
may not be efficiently utilizing its capital.
LOVELY PROFESSIONAL UNIVERSITY 97
