Question

Which statement is prepared in the process of funds flow analysis?

A Inventory Flow Statement Correct Answer Incorrect Answer
B Schedule of changes in working capital Correct Answer Incorrect Answer
C Cash Flow Statement Correct Answer Incorrect Answer
D Both A and B Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Fund Flow Statement implies a snapshot of the movement of funds, i.e. inflow or outflows of the firm’s financial assets for a specific period. It represents, from where the funds are received and where the funds are utilized by the company during a particular period. Statement of Changes in working capital is a summary that shows the net increase or decrease in the working capital of the business. The working capital of the firm increases if there is an increase in the current assets or decrease in the current liabilities. However, the working capital of the firm decreases if there is a decrease in the current assets and an increase in the current liabilities.  

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