Fund and cash flow statements

The management of funds is easier if there is documented data on liquidity. The balance sheet shows the assets and liabilities of a firm at a particular point in time. The profit and loss account partly explains the changes in assets and liabilities, showing how the year’s profit is distributed. Since 1975 companies were required to publish a funds flow statement (also known as the Source and Application of funds statement). This statement showed where a business obtained its funds from during the trading year and how they were used. For example, it could have shown that a firm’s sources of funds were profits, depreciation, the sale of assets and some new loans. During the year these funds may have been used to acquire new assets, pay dividends pay taxation or repay some loans. The statement also showed changes in the level of working capital over the year.

In 1991 the Accounting Standards Board (ASB) published its first Financial Reporting Standard, FRS 1, “Cash Flow Statements”. The new standard required companies to publish a cash flow statement instead of a funds flow statement in the annual audited accounts. It was argued that a funds flow statement contained a reorganization of existing figures in the profit and loss account and changes in the financial position between the opening and closing balance sheet dates. A funds flow statement offered little in the way of new information. In contrast, cash flow statements may include receipts and payments not disclosed elsewhere in the published financial statements. Another advantage of a cash flow statement is the standardization of the document. The format of funds flow statements were decided by managers.

Most agree that the replacement of funds flow statement with cash flow statements is an improvement in financial reporting. However, there are some criticisms.

In practice, little new information is shown in the statements. The new law encourages disclosure but does not enforce it.

Small limited companies are not bound to publish a cash flow statement because they are owner managed. However, medium sized firms are. This seems to lack a little logic since most medium sized firms are also owner managed.

Cash flow statements, like funds flow statements, are based on historic information. It is argued that cash flow statements based on future predictions are more useful. Cash flow forecasting is dealt with in the next section.

Задание 9. Переведите деловое письмо с русского языка на английский язык:

LETTER 3

Уважаемые господа!

Мы подтверждаем получение Вашего письма от 5 сентября с.г., из которого мы узнали, что Вы предъявили нам претензию по поводу задержки в представлении технической документации по контракту №…

Мы хотели бы напомнить Вам, что, согласно условиям контракта, техническую документацию следовало выслать в течение трех месяцев после открытия аккредитива в нашу пользу в … банке. Вы должны были открыть аккредитив не позднее 5 июня с.г., однако аккредитив был открыт только 25 июля. Таким образом, Вы нарушили контракт в отношении условий платежа, что вызвало задержку в представлении технической документации. В связи с этим мы вынуждены отклонить предъявленную Вами претензию.

С уважением, ….

Задание 10. Прочитайте и переведите текст по специальности со словарем:

Investment in stocks and shares can be made through any branch of the bank on behalf of its customers. All quoted Stock Exchange securities can be bought or sold with maximum security and minimum formality through the bank. Being in constant touch with leading stockbrokers in London and in the country, the bank is in a position to obtain information regarding all classes of stocks and shares in which customers may be interested. Shares may be bought or sold without any charges beyond those payable to a stockbroker and the bank is responsible for the collection of the proceeds of a sale and for the delivery of the certificate on a purchase. An investment report service is also often available for the customer who needs a second opinion on a portfolio being managed personally. In addition, professional advice can be given on investments in foreign stock not quoted on the London Stock Exchange.

Share certificates, documents, jewelry and other valuables can be stored in the strong rooms of the bank. They will be safer with the bank than at the customer’ home but it is his responsibility to insure them.

The bank also provides a continuing service for personal income tax payers, checking tax liabilities and generally assuming the main burden of work involved in the preparation of tax returns and claims. Because if the sources of the income and allowances are complicated, it is not easy to know for the individual if he is paying the right amount of tax. The bank helps the customer on particular problems resulting from Capital Gains Tax and Capital Transfer Tax. It may be able to point out ways in which the customer can quite legitimately minimize the effect of these taxes.

Insurance need not be a problem for the bank’s customer either. Insurance cover for life, house, accident or anything else may be effected through any Bank Insurance Service which employ highly experienced brokers in this field. They can usually arrange to obtain the best possible terms consistent with absolute safety.

Задание 11. Прочитайте специальный текст и перескажите его содержание на английском языке:

Successful cash control would mean a business has enough cash to meet immediate needs, but not so much, that resources are held in unproductive assets. A CASH FLOW FORECAST STATEMENT helps the business to achieve this. It is a statement which lists all the expected monthly receipts and payments for a particular period. This document will help identify times when the cash will be short, so that borrowing can be arranged. It will also highlight points where there are cash surpluses which could be used for investment. When drawing up a cash flow forecast, some purchases and sales will be on credit terms. This means that cash may not flow in for several weeks. Similarly, payments for credit purchases will not be made for a while. In addition, some business expenses do not take place monthly, but quarterly, annually, or perhaps in some other payment period. These lags mean that cash movements could vary from month to month. Most of the entries will be estimates. For example, it is not possible to predict precisely what the level of sales revenue will be in six months’ time. In addition, many costs are unpredictable. Businesses keep a record of the monthly cash flows so that a comparison can be made with predictions. Managers will be able to improve the accuracy of their estimates with experience.