Money Flow and the Firm.

Abstract This article says that many people are interested in the flow of cash through a concern. The treasurer who must know where the money cones from and to what purpose it has been applied, banks and other creditors, and last but not least the firm's advisors and auditors. Their interest is not so much in the amounts involved as in the source and application. The value of such a "financial flow analysis" becomes fully evident only after taking into account the profit and loss statement. As pointed out above, the detailed profit and loss statement forms the basis for segregating the financial sectors. In a profit and loss statement, one finds a clearcut distinction between accounts that record receipts and those which take up disbursements. These items inserted in the balance sheet to provide for the "cut-off" of the income for the period, are automatically neutralized in their effect on the flow of money by grouping them into the same financial sector. The "sector of financial flow" is formed according to various groups of homogeneous balance sheet and profit and loss accounts.