Uses Of Funds Flow Statement



Funds flow statement helps the financial analyst in having a more detailed analysis and understanding of changes in the distribution of resources between two balance sheet dates. In case such study is required regarding the future working capital position of the company, a projected funds flow statement can be prepared. The uses of funds flow statement can be put as follows.


It explains the financial consequences of business operations. Funds flow statement provides a ready answer to so many conflicting situations, such as:


  • Why the liquid position of the business is becoming more and more unbalanced inspite of business making more and more profits.
  • How was it possible to distribute dividends in excess of current earnings or in the presence of a new loss for the period?
  • How the business could have good liquid position in spite of business making losses or acquisition of fixed assets?
  • Where have the profits gone?


Definite answers to these questions will help the financial analyst in advising his employer / client regarding directing of funds to those channels which will be most profitable for the business.


It answers intricate queries. The financial analyst can find out answers to a number of intricate questions.


  • What is the overall credit-worthiness of the enterprise?
  • What are the sources of prepayment of the loans taken?
  • How much funds are generated through normal business operations?
  • It what way the management has utilized the funds in the past and what are going to be likely use of funds?
  • It acts as an instruments for allocation of resources.
  • It is a test as to effective or otherwise use of working capital .


The following two tabs change content below.
We, at, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to [email protected]

Leave a reply

Your email address will not be published. Required fields are marked *


* is aimed at revolutionising Bachelors in Management Studies education, also known as BMS for students appearing for BMS exams across all states of India. We provide free study material, 100s of tutorials with worked examples, past papers, tips, tricks for BMS exams, we are creating a digital learning library.

Disclaimer: We are not affiliated with any university or government body in anyway.

©2020 BMS - Bachelor of Management Studies Community 

A Management Paradise Venture

Ask Us On WhatsApp

Log in with your credentials


Forgot your details?


Create Account