Cash Flow Statement Solved Problems

Cash Flow Statement Solved Problems-65
Exercise 3.3 Sources and applications of funds II Using the data and information in the annual reports (especially the balance sheet and income statements) of Cerial Marketing Board provided for 19: Funds (or capital) is a collective term applied to the assortment of productive inputs that have been produced.Funds may be broadly categorised into operating (or working) capital (difference between current assets and current liabilities), and ownership (or investment) capital.

Exercise 3.3 Sources and applications of funds II Using the data and information in the annual reports (especially the balance sheet and income statements) of Cerial Marketing Board provided for 19: Funds (or capital) is a collective term applied to the assortment of productive inputs that have been produced.Funds may be broadly categorised into operating (or working) capital (difference between current assets and current liabilities), and ownership (or investment) capital.

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Funds are not only generated internally; they may be externally generated, and so the chapter finishes with a discussion of externally generated funds.

The aim of a cash flow statement should be to assist users: The statement therefore shows changes in cash and cash equivalents rather than working capital.

Once all sources and applications of funds are computed, they may be arranged in statement form so that we can analyse them better.

Now attempt exercises 3.2 and 3.3 Exercise 3.2 Source and application of funds I Given below are some different sources and applications of funds finance items purposely scattered for an Agribusiness Company K for the year ended 31 December 19X8.

It can be argued that 'profit' does not always give a useful or meaningful picture of a company's operations.

Readers of a company's financial statements might even be misled by a reported profit figure.

Thus, if a company sustains an operating loss before depreciation, funds are not provided regardless of the magnitude of the depreciation charges.

Application of funds of a company usually include: To avoid double counting, we usually compute gross changes in fixed assets by adding depreciation for the period to net fixed assets at the ending financial statement date and subtract from the resulting amount the net fixed assets at the beginning financial statement date.

Sources of funds that increase cash Sources of funds which increase cash are as follows: Then, the funds provided by operations of such a company will be obtained by adding the values of the two above items, i.e. Thus, the net income of a company usually understates the value of funds provided by operations by the value of the depreciation - in this case by 0,500.

But then, depreciation is not a source of funds, since funds are generated only from operations.

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