Advantages Of Marketing

Business , Marketing
Roles, importance or advantages of marketing can be described from customer's, business firm's and society's point of view as follows:

Benefits Of Marketing To Customers

The main advantages of marketing to customers can be studied as follows:

1. Need Satisfaction

As we know that the main objective of marketing is to satisfy customers by producing and supplying goods and services as per their needs or wants. So, marketing is important to fulfill needs and to provide satisfaction to the customers.

2. Providing Information

Marketing uses different methods and techniques such as advertising, sales promotion, publicity etc. to inform potential customers about the quality, taste, price, using methods and uses of products and services. So, it helps to provide information to the customer before buying goods.

3. Selection Facility

In market, we can find similar types of products produced by different firms. Marketing helps to identify the brand and select products according to their needs and interest. 

4. Improve Lifestyle

Marketing promotes better lifestyle by providing quality goods and services at affordable price. So, it helps to improve the living standard of the people.
 
Benefits Of Marketing To Business Organizations

Marketing is important or advantageous for business firms because of the following reasons:

1. Increase Production

Business firms uses different marketing techniques (advertising, sales promotion, public relation etc.) to enlarge the market. It helps to find new market and new demand for their products. So, marketing helps to increase production.

2. Revenue Generation

In any business company, there are different departments or functional areas such as production department, human resource department, accounting department, administrative department and marketing department. Among these departments only marketing generates revenue for the company. So, marketing activities are important to earn profit for the firm.

3. Planning And Decision Making

Marketing provides useful data and information about market, customers behavior, competitors, government policy etc. to the management. So, it helps the manager in planning and decision making process.

4. Increase Goodwill And Image

Marketing always tries to satisfy customers by providing goods and services according to their needs and wants at lower price. Satisfied customers become loyal to the company which helps to improve goodwill and image of business firm.
advantages of marketing
Benefits Of Marketing To The Society

Advantages of marketing to the society or nation can be explained as follows:

1. Economic Development

Marketing promotes productivity and efficiency which leads to maximum utilization of resources (natural resources, physical resources, finance resources etc.) in the country. Proper utilization of resources, better productivity and efficiency help to increase national income which helps in the economic development of the nation.

2. Employment Opportunities

Marketing promotes industrialization in the country. It generates employment opportunities in different ares such as research and development, production, promotion, distribution etc. So, it is very important to create employment opportunities in the country.

3. Rise In Standard Of Living

Marketing provides better quality products at lower price to the customers which helps to improve their lifestyle. It provides employment opportunities and helps to break vicious poverty circle in the society. So, it raises the living standard of the people.

4. Utility Creation

Marketing creates time utility (storage), form utility (product development), place utility (transportation), and possession utility (exchange) of products or services.
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Advantages And Disadvantages Of Decentralized Stores

Accounting , Business
Merits Or Advantages Of Decentralized Stores

The main advantages of decentralized stores can be expressed as follows:

1. Lower Cost

Stores are maintained near to the production area which helps to eliminate internal transportation cost and also minimizes material handling cost.

2. Less Risk

In centralized store, there is a risk of loss by fire, rain, earthquake etc. because of large volume of materials in single warehouse. But in centralized store, less volume of stock are kept according to the requirement of the single production unit which lowers the risk of loss.

3. Avoidance Of Undue Delay

In this storing system, purchasing, storing and supplying of materials are done by each production unit. So, delay in material supply can be avoided which eliminates disruption in the production process.

4. Better Control And Supervision

Each and every production center and department has separate store. It ensures better control, supervision and handling of goods.

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5, Suitability

Decentralized stores are suitable for large sized manufacturing companies with large production capacity, several branches, and departments.

Demerits Or Disadvantages Of Decentralized Stores

The main drawbacks, limitations or disadvantages of decentralized stores can be expressed as follows:

1. High Investment

It requires separate space for each and every production units and departments. So, more initial investment is required to set up these types of stores.
advantages disadvantages decentralized stores
2. Higher Cost

More staffing cost, administrative costs and supervision costs are required to manage decentralized stores. So, it is more costlier than centralized store.

3. Not Suitable

Decentralized store is not suitable for small business firms with less investment and less production capacity.

Pros And Cons Of Decentralized Stores In Short

Pros:
- It lowers material handling costs
- It becomes easy to store and control materials
- It is suitable for large manufacturing firms
- It avoids delay in supply of materials
- It eliminates internal transportation cost

Cons:
- It is not appropriate for small companies
- It requires more staffing, administrative and controlling costs than centralized stores
- More initial investment is required to set up decentralized stores
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Advantages And Disadvantages Of Centralized Stores

Accounting , Business
Merits Or Advantages Of Centralized Stores

The main advantages of centralized stores can be expressed as follows:

1. Economical

In centralized store, materials are kept only in one warehouse. More goods can be stored in single location that minimizes inventory costs, administrative costs and handling costs. So, it is economical than decentralized stores.

2. Better Control And Supervision

Because of single location and less storage space, it is easier for the storekeeper to inspect, supervise and control inventory properly.

3. Wastage Minimization

Because of proper supervision and tight control misuse and wastage can be minimized. Wastage minimization leads to decrease in the cost of production which helps to increase profitability of the business.

4. Safety

Centralized store ensures safety of goods because of better layout, better supervision and better store audit.

advantages disadvantages centralized stores

5. Fewer Employees

These stores can be managed by fewer specialized employees.

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6. Suitable For Small Firms

Centralized store is suitable for small and medium sized companies with less production units and departments.

Demerits Or Disadvantages Of Centralized Stores

The main drawbacks or disadvantages of centralized stores can be expressed as follows:

1. High Transportation Cost

Materials are supplied to different departments, branches and production units from single store. Therefore, it requires extra transportation and handling costs.

2. Chance Of Delay

Sometimes production centers cannot receive required materials on time because of delay in supply. In this situation production process may be interrupted.

3. Risk Of Loss

In centralized stores, large volume of stock are kept in single location. It increases the risk of loss by flood, earthquake, fire etc. There also exists a risk of obsolescence.

4. Unsuitable

These type of stores are not suitable for big manufacturing companies with several production units, branches and departments.

Pros And Cons Of Centralized Stores In Short

Pros:
- It reduces storing, material handling and supervision costs
- There is better supervision and store audit
- It is suitable for small manufacturing companies
- It minimizes staffing and stationary costs
- It helps to minimize the wastage of materials
- It requires less space for storing goods

Cons:
- It is not suitable for big manufacturers
- There is a possibility of delay in supply of materials
- There is a high risk of obsolescence
- It requires more transportation cost
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Advantages And Disadvantages Of Decentralized Purchasing

Accounting , Business
Merits Or Advantages Of Decentralized Purchasing

The main advantages of decentralized purchasing system can be expressed as follows:

1. Less Investment

In decentralized purchasing system, branches or departments can buy materials according to their needs and requirements. It does not require huge initial investment like in centralized purchasing.

2. Right Quality And Quantity

Materials are purchased to fulfill the current needs of the department or branch. In this procurement system, only required materials are purchased that ensures right quantity and quality.

3. Quick Process

Because of prompt buying decision, quick purchase orders and local suppliers, this process is easier and quicker than centralized procurement.

4. Easy Replacement

Defective materials can be replaced immediately in decentralized procurement system.

5. Better Relation With Local Supplier

Branches purchases their needed materials from local market which helps to establish better relation with local suppliers or sellers.
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6. Smooth Functioning

Materials can be obtained locally at any time without any difficulty. Because of easy and quick procurement process organizational activities can be run smoothly without any delay.

7. Suitable For Large Companies

This purchasing system is suitable for large manufacturing companies with several branches and departments.

Demerits Or Disadvantages Of Decentralized Purchasing

The main drawbacks or disadvantages of decentralized purchasing system can be expressed as follows:

1. High Purchasing Cost

In this purchasing system, company cannot enjoy the benefit of economies of scale. It may lose cash discount and quantity discount because of less quantity purchasing. So, purchase price of materials becomes high.

2. Knowledge Of Buying Staff

Decentralized purchase depends on the knowledge, skills and specialization of buying staff. Lack of appropriate knowledge and skills of staff may lead to over or under purchasing and may lack proper control and supervision of materials or inventory.
advantages disadvantages decentralized purchasing
3. Not Suitable For Small Firms

This procurement system is not suitable for small and medium sized companies with less investment, less production capacity, fewer branches and less operational activities. 

Pros And Cons Of Decentralized Purchasing In Short

Pros:
- It does not require huge initial investment
- Goods can be purchased in right quantity as per the requirement
- It is easy and quick purchasing process
- It is applicable for large companies having several branches and units
- Purchasing decisions can be made quickly

Cons:
- It is not appropriate for small business firms
- Company does not enjoy the benefit of bulk buying
- There exists a possibility of over or under purchasing of goods due to the lack of knowledge of staff.
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Advantages And Disadvantages Of Centralized Purchasing

Accounting , Business
Merits or Advantages Of Centralized Purchasing

The main advantages of centralized purchasing can be expressed as follows:

1. Lower Purchase Price

In centralized purchasing, materials are purchased by central department. So, company can enjoy the benefit of economies of scale, cash discount and quantity discount. Bulk buying also reduces ordering and carrying costs that lowers the purchase price of materials.

2. Better Supervision And Control

It eliminates recklessness, overlapping and duplication in the process of purchasing. It ensures uniform procurement and effective storing of materials. So, centralized purchasing helps to establish better material supervision and control system in the organization.

3. Systematic Recording

All buying functions are performed through purchase department which is properly managed by procurement manager and skilled buying staffs. So, material related records (purchasing, supply, inventory etc.) can be properly and systematically.

4. Better Relationship

It helps to maintain better relationship with suppliers/sellers which increases the bargaining power. It is also helpful at the time of shortage and emergency.

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5. Relief To The Managers

All the materials are purchased and supplied by a purchase department. Managers of other branches, departments and units do not have purchasing responsibility. So, they can focus on their main duties and responsibilities.

Demerits Or Disadvantages Of Centralized Purchasing

The main disadvantages of centralized purchasing can be expressed as follows:

1. Requirement Of High Investment

The main drawback of centralized purchasing is that it requires huge amount of initial investment to purchase materials for all branches and departments. 

2. Complexity

It is very difficult to purchase and supply materials to different branches and departments according to their needs and requirements. Buying staff cannot handle purchasing activity properly if the organization is very large with  several branches located at different geographical regions. So, this procurement is more complex than decentralized purchasing.

3. Chance Of Delay

In this system, procurement process is longer than decentralized purchasing. So, it is difficult for the branches to receive materials in time.
advantages disadvantages centralized purchasing
4. Not Suitable For Large Companies

It is not suitable for large companies with many branches located far from the headquarter.

5. Emergency Situation

Branches and departments are not allowed to purchase materials from local market. So, organizational activities can be delayed at the time of emergency because of the shortage of materials.

Pros And Cons Of Centralized Purchasing In Short

Pros:
- It minimizes purchasing price because of large scale buying and less carrying costs
- It ensures supervision and better material control system
- It eliminates recklessness and duplication in purchasing
- Inventory records can be maintained properly and systematically
- It maintains better relationship with seller

Cons:
- It requires high initial investment
- It is not suitable for large firms having several departments and branches because there is a chance of delay in receiving materials
- It will be difficult to replace defective materials
- This procurement system is not suitable at the time of emergency
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Advantages And Disadvantages of International Trade

Business , Marketing
Benefits Or Advantages Of International Trade

Some of the major advantages of international trade are as follows:

1. Promotes Specialization And Division Of Labor

International trade encourages the country to produce unique and quality products that can be easily exported in foreign countries. It requires specialization and division of labor for innovation and production of quality goods at lower price. So, it promotes specialization and division of labor.

2. Maximum Utilization Of Resources

Countries produce goods according to their available resources like natural resources, technological resources, financial resources etc. So, it helps to utilize country's resources properly.

3. Availability Of Products

Necessary goods can be imported from other countries to fulfill the demand of domestic country. So, international trade helps to obtain required products to satisfy country's demand.
4. Elimination Of Monopoly

Foreign trade discourages monopoly in the market because required commodities can be easily imported and surplus products can be exported in different countries. So, traders have no chance to create monopoly.

advantages disadvantages international trade

5. Industrial Development

Raw materials, technology, machinery and skills can be acquired from abroad because of international trade. This promotes industrial development in the country.

6. Lower Cost

International trade promotes specialization, division of labor and optimum utilization of resources by which large scale production with minimum wastage and leakage is possible. So, it helps to lower the cost of production.

7. Employment Opportunity

Because of international trade, large scale industries are established in the country. So, many people get job in the country. So, it creates employment opportunity.

Drawbacks Or Disadvantages Of International Trade

The main disadvantages of international trade are as follows:

1. Threat To Domestic Industries

Foreign trade may create threat to domestic industries because of the import of cheap products. Small industries may suffer due to unfair competition with big foreign companies.

2. Over Exhaustion Of Resources

Unrestricted export of minerals and raw material may lead to exhaustion of resources in the country. This may create environmental, social and economic problems in the future.

3. Shortage Of Goods

Producers try to export more products to expand market share and to earn more profit. This may create shortage of good in the domestic market.

4. Supply Of Harmful Products

Due to international trade, harmful goods may be imported in the country. Supply of these products in local market may effect people's health. Import of unnecessary goods negatively effects the economy.

Pros And Cons Of International Trade In Short

Pros:
- Ensures Maximum Use Of Country's Resources
- It helps to eliminate monopoly in the market
- It helps to bring specialization in the production process
- It minimizes the cost of production because of large scale production
- It generates employment opportunity because of industrial development in the country

Cons:
- High possibility of over exhaustion of natural resources
- It may create threat for domestic industries because of unfair competition
- Increases the risk of import of inferior and harmful products 
- It may increase economic dependence due to the loss of self sufficiency
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Importance Or Advantages Of Office Management

Business , General
Importance and advantages of office management can be expressed as follows:

1. Goal Attainment

Office management directs the efforts of all staffs (top level to bottom level) towards the achievement of company's goals and objectives. Planning, organizing, coordinating, directing and controlling are the major functions of management which helps to achieve organizational goals effectively.

2. Smooth Functioning

It maintains proper balance and relationship between staffs, jobs, departments and units. Effective communication is maintained between one person to another person, one department to another department and one job to another job. Proper command, direction, supervision, and instructions are supplied to ensure smooth functioning of office activities.

3. Optimum Utilization Of Resources

Office management always tries to utilize available resources like human resources, physical resources, financial resources and technological resources in proper way that helps to increase productivity and decrease wastage and unnecessary costs.

4. Better Coordination

Better coordination is required to link different office activities, departments and people in the organization. Office management maintains unity of action, proper communication and harmony by using different coordination mechanisms.

5. Cost Minimization

Office management encourages better utilization of resources, effective communication, better coordination and employee motivation in the office. It helps to increase productivity and reduce wastage, leakage that minimizes the cost of production. Reduction in the cost of production helps to increase profitability of the business.
advantages of office management
6. Goodwill And Public Relation

Office works are performed effectively and smoothly because of better management. Motivated employees can deal properly with customers and public. It helps to increase goodwill and maintain public relations.

7. Promotion Of Leadership

Office management provides good working environment in the office. Authority and responsibility are delegated according to the skill, qualification and capability of employees. Top level managers use their skills to motivate others for better performance so employees can develop leadership and managerial qualities.
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Advantages And Disadvantages Of Deflation

Business , Education
Positive Impacts, Benefits Or Advantages Of Deflation

The main advantages of deflation can be expressed as follows:

1. Increase In Purchasing Power

Negative inflation or deflation increases the value of money. So, purchasing power increases and price of goods and services decreases.

2. Lower Monthly Budget

As we know that deflation causes fall in the price of commodities, so people can satisfy their needs by spending less amount of money. So, it reduces the monthly budget which benefits middle and lower level consumers.

3. Increase In Saving

Due to fall in price of goods and less spending of money, people's saving will be increased at the period of deflation.

4. Higher Living Standard

Deflation helps to maintain better living standard because of lower expenditure and increase in saving.

5. Beneficial For Creditors

Deflation increases the real value of existing debt. So, creditors are benefited in this situation.

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6. Lower Business Costs

Deflation lowers the cost of business because of  decrease in the price of raw materials, machinery, technology and fixed assets. So, this period is appropriate for long-term investment.

Negative Impacts, Drawbacks Or Disadvantages Of Deflation

The major disadvantages of deflation can be described as follows:

1. Lower Consumer Spending

People may stop spending on luxurious and expensive products with the expectation of more decrease in price in the future. So deflation may encourage lower consumer spending which is not good for the economy.

2. Loss For Investors

At the time of deflation, investors and producers who hold large quantity of inventory suffer because of the decrease in the value of stock.

3. Increase Value Of Debt

As we know that deflation increases the value of debt, it makes difficult for the existing debtors to repay their loan.
advantages disadvantages of deflation
4. Possibility Of Unemployment

Business profit decreases because of decrease in the price which force the producers to stop production or reduce their production capacity. It may create unemployment problem.

5. Lower Economic Growth

Limited production, less consumer spending, increased value of debt and unemployment lead to lower economic growth and instability in the country.

Pros And Cons Of Deflation In Short

Pros:
- It lowers the monthly budget of because of decrease in the price of goods and services
- It helps to improve living standard of because of improved purchasing power
- It is beneficial for creditors because banks reduce the interest rate
- Suitable period for investment

Cons:
- It may lead to lower consumer spending
- It may create unemployment problem
- It negatively affect economic growth of the country
- It increases the real value of debt

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Advantages And Disadvantages Of Inflation

Business , Education
Benefits or Advantages Of Inflation

Positive impacts or advantages of inflation can be expressed as follows:

1. Beneficial For Investors

Price of commodities increases because of inflation. In this situation investors and producers can be benefited because of the increase in the value of stock.

2. Economic Growth

Producers try to increase their production capacity because of increase in the price of goods. It helps to utilize unused resources and labor. Inflation also helps to adjust relative price and wages. So, mild inflation is useful for the economic growth of the country.

3. Devaluation Of Debt

Value of debt will be decreased at the time of inflation because of the decrease in the value of money. So, debtors can repay their loan easily.

4. Easy Borrowing

Financial institutions get more money because of increase in wage and sufficient deposit. It makes easy for the people to borrow money from banks.

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5. Better Than Deflation

Deflation causes decease in the price of goods and services which stops the circulation of money. It increases the value of debt and discourages borrowings. So, inflation is far better than deflation.

Drawbacks Or Disadvantages Of Inflation

Negative effects or disadvantages of inflation can be expressed as follows:

1. Discourage Saving

Due to the decrease in the value of money, more money is required to satisfy the daily needs of people. It makes high cost of living. So, inflation discourages saving.

2. Decrease In Investment

Because of more expenditure and less saving, capital formation will be reduced which leads to decrease in investment.

3. Unemployment Problem

Due to inflation, cost of production become high. On the other hand, investment capacity is decreased. So, unemployment problem may arise because of decrease in production.
advantages disadvantages of inflation
4. Business Uncertainty

Inflation discourages foreign investment in the country. It also effects import and export business. So, it creates business uncertainty.

5. Economic Instability

Inflation is responsible for high cost of living, reduction in saving, investment and unemployment which may encourage black marketing, robbery, theft etc. So, it may create economic instability.

Pros And Cons Of Inflation In Short

Pros:
- It increases the value of stock
- It is useful for economic growth
- It becomes easy for debtors to repay loan
- It encourages maximum utilization of factors of production because of increase in the market price of products
-  It becomes easy to borrow money from financial institutions

Cons:
- It lowers saving because of high cost of living
- It discourages investment because of less saving
- It may create unemployment problem
- It brings economic instability in the country
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Limitations Of Accounting

Accounting , Finance
The main drawbacks or limitations of accounting can be highlighted as follows:

1. Ignores Non-monetary Items

Accounting records only monetary items (that can be measured in terms of money) and ignores non-monetary items (cannot be measured in terms of money) such as employee morale, loyalty, management efficiency etc. that play important role in success or failure of business.

2. Past Data

Generally, accounting uses past or historical financial data and information. It ignores some key factors like price level change and inflation. So, it may fail to show actual financial strength or weakness of the firm.
disadvantages of accounting
3. Frauds And Manipulation

Several accounting treatments are based on personal judgment and estimates. So, there exists a chance of manipulation of data and commitment of frauds.

4. Several Alternatives

There are different methods of stock valuation, depreciation, capital budgeting decision, amortization of assets etc.. Several alternatives may create complexity and confusion.

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5. Lack Of Secrecy

It is very difficult to maintain secrecy of accounting data and information because of several users.

6. Difficulty In International Trade

Different accounting standards and methods may create difficulty in international trade.
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Benefits Of Job Design

Education , Management
The main advantages of benefits of job design can be highlighted as follows:

1. Assists Human Resource Planning

Job design helps HR planning process by providing essential information about the job to be performed such as nature of job, qualification, skill and knowledge to complete the job etc.

2. Employee Motivation

Under job design, duties and responsibilities of employees are allocated according to their skill, capacity and knowledge which helps to motivate the employees in the organization.

3. Low Labor Turnover

Well designed job reduce labor turnover, conflict and absenteeism because of motivation and job satisfaction.
advantages job design

4. Goal Achievement

Job design helps to motivate the employees by reducing absenteeism frustration and stress which helps to achieve organizational goal more efficiently and effectively.

5. Quality Of Life

Job design creates favorable working condition in the organization. It also establishes better labor relationship between management and employees. So, it ensures better quality of life.

6. Less Supervision Cost

It is another benefit of proper job design. Duties and responsibilities are scientifically allocated according to the competency of the employees. So, less supervision is required for competent employees which reduce supervision cost.

7. Increased Productivity

Because of employee motivation, proper allocation of job, good working condition and job satisfaction, productivity and profitability can be increased.

8. Good Labor Relation

Job design promotes good relation among employees and between management and employees.
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Advantages And Disadvantages Of Variable Costing

Accounting , Business
Benefits / Merits Or Advantages Of Variable Costing

The main advantages of variable costing can be highlighted as follows:

1. Simplicity

Variable costing system is simple and easy method of cost accumulation than absorption costing approach.

2. Assists CPV Analysis

It provides essential data and information for cost volume profit (CPV) analysis.

3. Cost Separation

It clearly separates manufacturing costs into fixed costs and variable costs which simplifies production activities.

4. Relation With Standard Costing And Budgetary Control

Cost controlling techniques such as budgetary control and standard costing are related with variable costing.

5. Easy Profit Determination

It is very easy to determine profit under variable costing. Profit is determined on the basis of sales and it is not affected by inventory changes.

6. Planning And Controlling

Variable costing helps the management in cost control and profit planning.

Drawbacks / Limitations Or Disadvantages Of Variable Costing

The main disadvantages of variable costing system can be highlighted as follows:

1. Ignores Accounting Principles

This method of cost accumulation ignores generally accepted accounting principles (GAAP).

       Also Read: 

2. Difficult To Separate Costs

It is very difficult to separate manufacturing overhead into variable costs and fixed costs.

advantages disadvantages variable costing

3. Understate Of Cost

This method understates the product cost by excluding fixed costs. So, fair cost of production cannot be determined.

4. Unsuitable

Variable costing is useful for internal reporting only and not suitable for external reporting.

Pros And Cons Of Variable Costing In Short

Pros:
- It is useful for cost volume profit analysis because it provides data about fixed cost, contribution margin etc.
- It is very helpful for management to make pricing decisions
- Profit can be determined easily in this method
- It simplifies production activities
- It provides cost data and information which is helpful for management control

Cons:
- It does not follow generally accepted accounting principles (GAAP)
- It is not suitable for making long-term pricing policy
- It becomes to separate manufacturing costs into fixed and variable costs
- Accurate cost of production cannot be determined because it excludes fixed costs
- It is not useful for external users such as investors, shareholders, public etc. because it is prepared for internal use only.
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Disadvantages Of Cash Flow Statement

Accounting , Finance
The major limitations or disadvantages of cash flow statement can be described as follows:

1. Limited Scope

Cash flow statement has limited scope because it cannot reveal net income from operation. 

2. No Complete Information

Cash flow statement cannot show the complete and up-to-date financial position of the firm.

3. Chance Of Inaccuracy

It may provide wrong information if there is wrong data in the balance sheet.

4. Ignores Accounting Concept

Cash flow statement ignores accrual concept of accounting.

True net income cannot be obtained because cash flow statement ignores non-cash items.

6. Historical Data

It uses historical financial data from balance sheet and income statement. So, it may not be suitable for future forecasting and financial planning.
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Advantages Of Cash Flow Statement

Accounting , Finance
The main benefits or advantages of cash flow statement can be studied as follows:

1. Cash Inflow And Outflow

Cash flow statement reports about cash inflow and cash outflow and discloses the change in cash balances between two balance sheets.

2. Cash Forecast

Cash flow statement helps to identify future cash need by revealing current cash position. It helps the management to forecast future cash flow.
advantages cash flow statement
3. Liquidity And Profitability

It presents current cash position which helps to ascertain solvency, profitability and liquidity position of the business.

4. Financing Decision

Management can make different financing and investment decisions with the help of cash flow statement.

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5. Financial Planning

It helps the management to formulate financial plans.

6. Capital Budgeting Decisions

Capital budgeting decisions are taken on the basis of projected cash flows.

7. Prevents Mismanagement Of Cash

Cash flow statement prevents mismanagement of cash in the business firm.
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Disadvantages Of Funds Flow Statement

Accounting , Finance
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. 
disadvantages funds flow statement
4. No Future Indication

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.
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Advantages Of Funds Flow Statement

Accounting , Finance
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.
advantages funds flow statement
4. Evaluation Of Financial Position

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.
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