The correct answer is: D. Current assets (-) Current liabilities.
Funds flow analysis is a technique used to analyze the changes in a company’s financial position over time. It is used to identify the sources and uses of funds, and to assess the company’s liquidity and solvency.
In funds flow analysis, the term “funds” refers to the net working capital of a company. Net working capital is calculated by subtracting current liabilities from current assets.
Current assets are assets that are expected to be converted into cash within one year. Examples of current assets include cash, accounts receivable, inventory, and short-term investments.
Current liabilities are liabilities that are due to be paid within one year. Examples of current liabilities include accounts payable, short-term notes payable, and accrued expenses.
The difference between current assets and current liabilities is the net working capital of a company. A positive net working capital indicates that a company has more current assets than current liabilities. This means that the company has the ability to meet its short-term obligations.
A negative net working capital indicates that a company has more current liabilities than current assets. This means that the company may have difficulty meeting its short-term obligations.
Funds flow analysis is a valuable tool for assessing a company’s financial health. It can be used to identify potential problems, such as a decline in net working capital. It can also be used to track the company’s progress over time.