Funds Flow Statement

Funds Flow Statement

Funds Flow Statement: It is statement deals with the financial resource for running business activities. It explains how the funds obtained and how they used.
Sources of Funds: There are two sources of funds internal sources and external sources.
Internal Source: Funds from operations are the only internal sources of funds and some important points add to it they do not result in the outflow of funds
1. Depreciation on fixed assets
2. Preliminary expenses or goodwill written off. Loss on scale of fixed profit on scale of fixed assets
3. Deduct the following items as they do not increase the funds: Profit on revaluation of fixed assets.
External Sources: (a) funds from long term loans (b) scale of fixed assets (c) funds from increase in share capital
Application of Funds: (a) purchase of fixed assets (b) payment of divided (c) payment of tax liability (d) payment of fixed liability
ICD (Inter Corporate Deposits): Companies can borrow funds for a short period .for example 6 months or less from another company which has surplus liquidity .such deposits made by one company in another are called ICD
Certificate of Deposits (CD): The CD is document of title similar to a fixed deposited receipts issued by banks there is no prescribed interest rate on such CDs it is based on the prevailing markets conditions.
Euro Issues: The euro issues means the issues is listed on a Europeans stock exchange. The subscription can come from any parts of the world except India.
GDR (Global Deposits Receipts): A depository receipt is basically a negotiable certificate dominated in us dollars that represents a non –US company publicly traded in local currency equity shares.
ADR (American Depository Receipts): Depository receipt issued by a company in the USA is known as ADRs. Such receipts are to be issued in accordance with the provisions stipulated by the Securities Exchange Commission (SEC) of USA like SEBI in India.
Commercial Banks: Commercial banks extend foreign currency loans for international operations, just like rupee loans. The banks also provided overdraft.
Development Banks: It offers long-term and medium term loans including foreign currency loans.
1. International Agencies: International agencies like the IFC, IBRD, ADB, IMF etc. provide indirect assistance for obtaining foreign currency.
   Seed Capital Assistance: The seed capital assistance scheme is desired by the IDBI for professionally or technically qualified entrepreneurs and persons possessing relevant experience and skills and entrepreneur traits.
   Unsecured Loans: It constitutes a significant part of long-term finance available to an enterprise.
   Cash Flow Statement: It is a statement depicting change in cash position from one period to another.
   Sources of Cash:
   1. Internal Source:- (a) Depreciation (b) Amortization (c) Loss on sale of fixed assets (d) Gains from sale of fixed assets (e) Creation of reserves.
   2. External Sources:-(a) Issue of new shares (b) Raising long term loans (c) Short-term borrowings (d) Sale of fixed assets, investments.
   Application of Cash: (a) Purchase of fixed assets (b) Payment of long-term loans (c) Decrease in deferred payment liabilities (d) Payment of tax, dividend (e) Decrease in unsecured loans and deposits.