Difference Between Cash Flow and Fund Flow

Publication Date :

07 Feb, 2018

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Table Of Contents

Cash Flow and Fund Flow Differences

Cash flow refers to the overall cash generated by the firm in a specific accounting period. It is calculated as the total of cash from operations, cash flow from financing, and cash flow from investing activities. In contrast, the fund flow of the company records the movement of the cash in and out of the company during the specified time.

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.

Cash Flow and Fund Flow Differences

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 statement 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 budgeting. Fund flow statement 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

Basis for Comparison	Cash Flow	Fund Flow
Inherent meaning	Cash flow is based on a narrow concept called “cash.”	Fund flow is based on a wider concept called “working capital.”
Usefulness	The cash flow statement's utility is finding out the net cash flow.	The utility of fund flow is to understand the financial position of the company.
Source	The cash flow statement starts with the opening balance and, after adjustments, comes out with net cash inflow/outflow.	The fund flow statement calculates the difference between sources of funds and the application of funds.
WC shown	As shown in the operating activities of the cash flow statement;	As shown in the statement of changes in working capital;
Type of accounting	Follows the cash basis of accounting;	Follows the accrual basis of accounting;
Effect	Through cash flow analysis, we get to know the net cash flow.	Through fund flow analysis, we get to know the change in working capital.
Is it a financial statement?	Yes.	No.
Term	Short term analysis of cash flow;	Long term analysis of working capital;
Used for	Cash budgeting.	Capital budgeting.

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 budget and take necessary steps regarding the specific items which affect the “sources & uses of funds” in the company.