Funds Analysis and Cash-Flow
Analysis
• Flow of Funds (Sources and Uses) Statement
• Accounting Statement of Cash Flows
Flow of Funds Statement
A summary of a firm’s changes in financial position from one period to another; it is also called a sources and uses of funds statement or a statement of changes in financial position. Has been replaced by the cash flow statement
(1989) in U.S. audited annual reports.
Why Examine the Flow of Funds Statement
QUESTION?
Why should we bother to understand a
Flow of Funds Statement that is no longer required to appear in U.S. audited annual reports? Why Examine the Flow of
Funds Statement
The Flow of Funds Statement:
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•
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Includes important noncash transactions while the cash flow statement does not.
Is easy to prepare and often preferred by managers for analysis purposes over the more complex cash flow statement.
Helps you to better understand the cash flow statement, especially if it is prepared under the
“indirect method.”
Flow of Funds Statement
What are “funds”? funds All of the firm’s investments and claims against those investments.
Sources and
Uses Statement
The letters labeling the boxes stand for Uses, ses Sources, ources Assets, ssets and
Liabilities (broadly defined). The pluses
(minuses) indicate increases (decreases) in assets or liabilities.
Adjusting the “Basic” Sources and
Uses Statement
The following three slides are Basket
Wonders’ Balance Sheet and Income
Statement
This information will be needed to adjust the “basic” Sources and Uses Statement.
