Explanation:

Fund flow statement is an important tool of financial statement analysis which is prepared by the internal management for decision making i.e. it is internal analysis. It is a statement which shows sources and application of funds during one year i.e. from previous year’s Balance Sheet to Current year’s balance Sheet. Following are the objectives of FFS:

 (a) To obtain information regarding changes in assets in two time periods

(b) To obtain information regarding changes in liabilities in two time periods

(c) To obtain information regarding changes in capital in two time periods