In this article, we’re discussing the difference between cash flow and fund flow.
This is part of our free series on banking in India, covering topics like opening an NRI bank account, which you can access here.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Difference Between Cash Flow and Fund Flow
- Reasons to Use a Cash Flow Statement
- Reasons to Use a Fund Flow Statement
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Difference Between Cash Flow and Fund Flow
The main difference between cash flow and fund flow is that cash flow assesses the income generation and expenses of a business while fund flow assesses the long-term financial health of a business.
Additionally, an analysis of a business’ cash flow statement includes three main areas, which include operating cash flow, investing cash flow, and financing cash flow.
In short, it is an assessment of a business’ cash inflows and outflows. This can help assess a business short-term obligations and liquidity position.
On the other hand, fund flow analysis looks at a business’ long-term financial health by assessing its sources of funds, uses of funds, and net change in funds over a specific period.
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Reasons to Use a Cash Flow Statement
There are a number of reasons to use a cash flow statement, ranging from assessing a business’ liquidity to monitoring how a business generates cash from operating activities.
Assessing cash flow statements can also help identify patterns in cash generation, including seasonality. This can then assist management with effectively managing a business’ cash position based on forecasted requirements.
Other Reasons to Use a Cash Flow Statement
- Assessing liquidity
- Monitoring performance
- Managing seasonality
- Making investment decisions
- Formulating projections
- Assessing financial health
- And more
Reasons to Use a Fund Flow Statement
While the cash flow statement is the primary tool used to assess the movement of funds within a business, fund flow analysis can help managers and shareholders better understand the source and use of funds over a longer period of time.
Reasons to Use a Fund Flow Statement
- Analyzing financial position
- Assessing long-term financial health
- Evaluating a business’ capital structure
- Identifying cash flow problems
- Tracking working capital
- Supporting investment decisions
Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into the difference between cash flow and fund flow. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What Is Cash Flow and Fund Flow?
Cash flow refers to the inflow and outflow of cash from a business over a specific period of time. Fund flow refers to the source, use, and net change of funds in a specific period of time.
What Is Fund Flow?
Fund flow refers to the source, use, and net change of funds in a specific period of time. It is generally used for assessing the long-term financial health of a business.
What Is Meant by Cash Flows?
Cash flow refers to the inflow and outflow of cash from a business over a specific period of time. It is generally used for assessing the short-term financial health of a business. Likewise, cash flow analysis can be used to make business decisions, plan for cash constraints, and monitor liquidity.
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