This document discusses financial statement analysis tools and techniques. It defines financial statements as formal records of a business entity's financial activities that reveal its financial health and help with decision making. The document then discusses fund flow statements, cash flow statements, and their objectives, advantages, and disadvantages. Fund flow statements depict the flow of working capital over time, show sources and uses of funds, and highlight financial strengths and weaknesses. Cash flow statements depict cash inflows and outflows and help with forecasting and financing decisions.

1. Name- Bhumika H Sadija
Roll no- FB350
Subject- Advanced Financial Management
Topic- Financial Statements

2. Meaning
• Financial statement also referred to as the Financial Report is a
formal and structured record of the financial activities of a business
entity.
• It reveals the financial health of an entity with regard to the profits
earned during a specific period.
• Financial statements are a form of reports which help management
in decision making process.
• Such reports are prepared after a fixed time period to
enable management to carry out its day-to-day functions.

3. Tools and techniques of financial statement analysis

4. Fund flow statement
'Fund flow statement' is a statement which depicts the flow of
working capital or funds during a specified period of time.
Objectives of fund flow statement
• The statement's main objective is to ascertain various sources from
where the funds were raised and the specific manner in which they
were utilised between the dates of the two balance sheets.
• The statement draws special attention to the various sources and
application of 'Working Capital' of a business organisation.
• It highlights the financial 'Strength' and 'Weaknesses' of a business
organisation.

5. Advantages and Disadvantages
Advantages
• Helps in Improving the Use of Working Capital
• Helps Knowing the Overall Creditworthiness of a Firm
• Helps in the Formation of a Reasonable Dividend Policy
Disadvantages
• Fails to Disclose Cash Position
• Historic in Nature

6. Cash Flow Statement
Cash Flow Statement may be defined as a statement, which depicts the
changes in financial position of a business organization due to 'Inflow'
and 'Outflow' of cash.
Objectives
• A Cash Flow Statement, no doubt, forecasts the future cash flows
which helps the management to take various financing decisions since
synchronization of cash is possible.
• Showing inflow and outflow of cash into/out of the business during
specific period.

7. Advantages and Disadvantages
Advantages
• It is helpful in assessing the changes in 'Cash Position' between
'Profit & Loss Account' and 'Balance Sheet' items of two
consecutive accounting periods.
• Disclosures made by the 'Cash Flow Statement enables the
management of a business enterprise to initiate preventive
measures in financially difficult situations.
• It facilitates listing out the 'Potential Financial Flows', which may
be put to use during crisis conditions.

8. Disadvantages
• Non-Cash Transactions are Overlooked
• Not a Substitute for an Income Statement
• Historical in Nature

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