Investing Activities: Such activities involve the acquisition and sale of long-term assets and other investments, which are not covered in cash equivalents.It indicates the degree to which a company’s regular business operations have generated enough cash flows in order to maintain operating efficiency, pay dividends to shareholders, repay loans, invest in acquiring assets, etc. Operating Activities: Operating Activities are the primary revenue-earning activities of the company.Example: Treasury Bills, Commercial Papers, Commercial Bills, Certificate of Deposit, Call Money, etc. Securities with a short maturity period, usually less than or equal to three months from the date of acquisition. Cash equivalent: Short-term highly liquid investments readily convertible into cash.Cash: Cash in hand and demand deposits with the bank.The economic decision-making by the investors is based on the analysis of the company’s ability to generate cash and cash equivalents, as well as the timing and certainty of generation. It involves the reconciliation of opening and closing cash balances. When there is a change in cash position resulting in an increase in cash, it is called inflow of cash, whereas when there is a change in cash position leading to a decrease in cash position, is called outflow of cash. Net Cash Flow is the difference between cash inflow and cash outflow, from each activity of the business concern. The cash flow statement reports the Net Cash Flow. Thus, it indicates the changes in the cash status of the company, be it related to receipts, payment, or disbursement.
It deals with those items which involve cash transactions. The term ‘cash flow’ is a combination of two words ‘cash’ and ‘flow’ wherein the words cash refers to the cash balance in hand and at the bank, whereas flow implies the movement of cash in and out of the organization, which can be increased or decrease. To prepare a cash flow statement, a financial statement of two different financial years is required. Indicates the increase or decrease in working capitalĪ Cash Flow Statement implies the statement containing cash inflows and outflows of an enterprise during a particular period of time.
asset and liabilities between two financial year. To explain the causes of changes in the balance sheet items, i.e. To explain the cash movement amidst two points of time. Format of Statement of Changes in Working CapitalĬash Flow Statement is the summarized statement of cash receipts and cash payments of the firm between two financial periods.įund Flow Statement is a financial tool, designed to analyse the changes in financial position of the firm, comparing two financial years.
Format of Cash Flow Statement – Direct Method.Format of Cash Flow Statement – Indirect Method.Content: Cash Flow Vs Fund Flow Statement
In this section, we will discuss the difference between cash flow statement and fund statement, using their format and examples. Conversely, Fund Flow Analysis helps in ascertaining the firm’s efficiency in utilizing the working capital. In this way, Cash Flow Analysis help in determining the cash-generating efficiency of the entity. While a cash flow statement is concerned with the flow of actual or notional cash, a fund flow statement deals with cash as well as all the other items that constitute working capital.
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