Question
Distinguish between cash flow and funds flow analysis? Mention the components of funds flow statement
Answers
GPT 3.5
Cash flow analysis focuses on the movement of cash in and out of a business, tracking the actual cash transactions that occur. It helps to understand the liquidity position of the business and its ability to meet short-term obligations. On the other hand, funds flow analysis looks at the sources and uses of funds in a business, including both cash and non-cash transactions. It helps to understand the overall financial health and performance of the business.
Components of funds flow statement:
1. Sources of funds - Cash inflows from operations, borrowings, equity issuance, etc.
2. Uses of funds - Cash outflows for operating expenses, debt repayment, capital expenditures, etc.
3. Changes in working capital - Reflects the change in current assets and liabilities over a period.
4. Non-operating activities - Includes cash flows from investing and financing activities.
5. Net increase or decrease in funds - Shows the overall change in funds during the period.
Overall, funds flow analysis provides a more comprehensive view of the financial situation of a business compared to cash flow analysis, which only focuses on cash transactions.
Components of funds flow statement:
1. Sources of funds - Cash inflows from operations, borrowings, equity issuance, etc.
2. Uses of funds - Cash outflows for operating expenses, debt repayment, capital expenditures, etc.
3. Changes in working capital - Reflects the change in current assets and liabilities over a period.
4. Non-operating activities - Includes cash flows from investing and financing activities.
5. Net increase or decrease in funds - Shows the overall change in funds during the period.
Overall, funds flow analysis provides a more comprehensive view of the financial situation of a business compared to cash flow analysis, which only focuses on cash transactions.