Cash Flow and Fund Flow Differences

Cash and fund flow are completely different statements with varied scopes and purposes.

  • The cash flow statement is one of the four important financial statements every investor should look at. It is prevalent and useful when one wants to know about a company’s liquidity position.On the other hand, the fund flow statement talks about a company’s financial position in a given period. It talks about sources of funds and the application of funds.

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Cash Flow vs Fund Flow Infographics

Key Differences Between Cash Flow and Fund Flow

  • The cash flow statement is one of the four financial statements every investor looks at to understand the financial position. The fund flow statement, on the other hand, isn’t a financial statement.  The cash flow statement is prepared so that the company’s net cash flow can be calculated at the end of a particular period. A fund flow statement is prepared to see the sources and uses of funds during a particular period and how that “change in the funds” affects the company’s working capital.The cash flow statementCash Flow StatementA Statement of Cash Flow is an accounting document that tracks the incoming and outgoing cash and cash equivalents from a business.read more is created by following a cash basis of accounting. On the other hand, the fund flow statement is created by following the accrual basis of accounting.The cash flow statement is used for cash budgetingCash BudgetingCash budget refers to cash inflows and outflows estimations made by a company’s management over a given period to evaluate whether the business has adequate cash & cash equivalents to meet its operational needs in the coming future.read more. Fund flow statementFund Flow StatementFund flow statement is a statement that compares the two balance sheets by analyzing the sources of funds (debt and equity capital) and the application of funds (assets) and its reasons for any differences. It helps the company see through where their money has been spent and from where they have received the money (long-term funds raised by issues of shares, debentures, and sale of non-current assets).read more is used for capital budgeting.The cash flow statement is prepared to see the short-term effect of cash flow. The fund flow statement is prepared for a long-term purpose.

Comparative Table

Conclusion

If we compare cash flow and fund flow, cash flow is more prevalent among investors and more used. But if we look at them separately, we will see that both serve a meaningful purpose.

Cash flow serves a company and its investors and potential investors by showing exactly how much cash is injected into the company and how much cash is being paid. On the other hand, a fund flow statement helps a company set up a capital budgetCapital BudgetCapital budgeting is the planning process for the long-term investment that determines whether the projects are fruitful for the business and will provide the required returns in the future years or not. It is essential because capital expenditure requires a considerable amount of funds.read more and take necessary steps regarding the specific items which affect the “sources & uses of funds” in the company.

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This article has been a guide to cash flow vs. fund flow. Here we discuss the top differences between cash flow and fund flow statements, infographics, and a comparative table. You may also have a look at the following articles to learn more about accounting –

  • Capital Budgeting TechniquesAccrual vs ProvisionAccrual vs DeferralCash Flow AnalysisCash Flow Statement Importance