Funds Flow Analysis and Determinants of Fixed Assets

The core objective of this study is to ascertain a link between the investment in fixed assets and the changing in the patterns of working capital. The relation between the flow of funds and the fixed assets is a central issue of the study. It is concluded in this study that funds from different sources determine the investment in fixed assets by different ways. With the help of this model, corporate planners and financial analysts can quantify the impacts of the flows of various funds on the assets holding patterns. Important conclusion of the model is that “fixed assets and working capital are complements. Working capital of a firm will increase with the enhancement in fixed assets”. The model is based on a single behavioral equation. The study is a mixture of the financial accounting postulates and econometric techniques.