Some of the notable limitations or disadvantages of funds flow statement can be highlighted as follows:
1. Historical
Funds flow statement is historical in nature because past financial information are used to prepare it. Financial statements and balance sheets of previous period are the bases of funds flow statement. So, it cannot present accurate current position of the business.
2. Not Original
It is only the rearrangement of financial data of balance sheet, financial statement and the income statement. So, funds flow statement is not original as it cannot be prepared alone.
3. No Cash Position
Funds flow statement does not disclose the cash position of the firm, for which cash flow statement should be prepared separately.
It discloses past financial situation of the firm which may not be suitable for future purpose.
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5. No Non-fund Transactions
It ignores non-fund transactions such as purchase of assets or properties by issuing shares. It records only those transactions which directly affect working capital.
6. Not Suitable
Funds flow statement is not suitable for financial analysis.
