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How are sources and applications categorized for proper interpretation of funds flow statement?
The business and industry still uses fund flow statements in their informative way. Sources of funds which increase cash are as follows: It happens when there is a net decrease in any asset other than cash or fixed assets or a gross decrease in fixed assets. Here, funds provided by operations (which usually are not expressed directly in the income statement).
Once the sources and applications are categorized properly. What propositions do you need to remember for proper interpretation of funds flow statement?
The four components which are required for the interpretation are:-
a) Competitive environment
b) Strategic thrust
c) product/market dynamics
d) Competitive cost position and restructuring.
These components require:-
• studying and assessing the external environment;
• understanding the internal environment of the company;
• adopting a leadership strategy for the company;
• strategically planning the finances of the company.
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