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Deutsche Brauerei

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Deutsche Brauerei
QUESTION FOR REPORT/ DISCUSSION

2. What are the characteristics of Fund flow statement and its uses?

What do the financial forecast and sources and uses of funds statement of company tell us?

Discuss about breakeven analysis. What does the breakeven chart of the company tell us?

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Fund Flow Statement

Financial statements mainly include profit and loss account and balance sheet. Profit and loss account lists out all the expenses made by the firm and revenue earned over a period of time. Balance sheet depicts the financial position of the firm at a particular point of time. While fund flow statement is complimentary to both balance sheet and profit and loss account, it brings a clear idea about the movement of funds in and out of the firm, during a particular period of time.

Meaning of Fund Flow
The financial statement of the business indicates assets, liabilities and capital on a particular date and also the profit or loss during a period. But it is possible that there is enough profit in the business and the financial position is also good and still there may be deficiency of cash or of working capital in business. If the management wants to find out as to where the cash is being utilized, financial statement cannot help. Therefore, a statement is prepared of the sources and applications of funds from where Working Capital comes and it is utilized. This is called Fund Flow statement.
Meaning of ‘Fund’
In a popular and generally accepted sense the term ‘fund’ is used to denote the excess of current assets over current liabilities :
Working Capital = Current Assets – Current Liabilities
Meaning of ‘Flow’ of Fund
Flow of funds means transmigration (coming and going) of funds. In other words, Flow of funds means change in Working capital, as in funds flow statement the words ‘funds’ mean net working capital.
Hence Coleman rightly states that, “The fund statement is statement summarizing the significant
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