A fund from operation is determined with the help of net income or loss, non-operating and non-cash items.
It helps the analyst to understand if the increase in funds is due to the sale of assets or improvement in company performance. It helps the management to frame or change the financial policy of the company.
The difference of sources and uses is called net changes in working capital.
Ignores the non-fund transactions: fund flow statement ignores the non-fund transactions i. To Help in Proper Allocation of Resources: The objective of funds flow statement is to provide information regarding the allocation of limited resources with more efficiently and effectively.
December Debenture-holders are the creditors of the company.