The main benefits or advantages of funds flow statement can be highlighted as follows:
1. Source And Use Of Funds
Funds flow statement discloses the source of funds received by the firm and the areas where those funds are used.
2. Changes In Financial Position
It discloses the changes in financial position (increase or decrease in working capital) and explains the reasons for changes.
3. Allocation Of Resources
Funds flow statement helps in proper allocation of resources by providing key financial information and data to the management.
It provides information regarding financial structure, fund generating capacity, position of assets and liabilities of the firm, working capital condition etc. which helps to know the actual financial position of the firm.
5. Future Guidance
Funds flow statement provides past financial data and information to the management. It helps the top level management to make future financial policies and plans.
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6. Use Of Working Capital
Funds flow statement checks the proper use of working capital and gives suggestions to improve.
7. Image And Goodwill
It ensures proper allocation of resources and proper use of working capital which increase the productivity and profitability of the firm. So, it helps to maintain good image and goodwill among shareholders.
