fund flow and cash flow

sir one more question
What all things added and deducted in cash flow
should not be added or deducted in fund flow sir

asked Sep 20, 2016 in Cash Flow Statement and Fund Flow Statement by ABRAHAM PETER (4 points) 142 views

1 Answer

0 votes

As I understand your question, you want to know which items are to be added to Profit and deducting from Profit to find out (a) Cash From Operations and (b) /Funds From Operations.  Before we discuss that we must understand the means of (a) CASH and (b) FUNDS.

Cash and Its Equivalents: This basically means Cash in Hand + Bank Balance + Short Term Investments which can be converted into cash without much change in its value.

Funds: Funds for the purpose of Fund Flow Statement means Net Working Capital (Current Assets - Current Liabilities).

If you notice from above Operating Profit before Working Capital Changes is actually Funds From Operations.  The next step in finding out Cash from Operating Activities is to make adjustments for changes in Current Assets and Current Liabilities.  This means upto this stage there is no difference between CFS and FFS.  The difference from this step is because their aim is different. 

answered Sep 25, 2016 by jbsclasses (3,853 points)