What is Cash Flow?

Cash Flow is a term used in finance and accounting. It refers to the inflow and outflow of cash or assets within an organization in a specific period. It records cash that comes in through sales or loans and goes out through loan repayments or purchases.

Cash Flow Statement promotes investment management by helping investors analyze the company’s cash position. Another effective strategy for investment management is knowing how to transfer shares from one demat account to another account online.

• It enables you to determine only the net cash flow of the firm.
• The analysis done is for a short period such as monthly, quarterly, or half-yearly.
• It captures the differences in cash in the opening and closing balance.

 

What is Fund Flow?

Fund Flow refers to the net inflow and outflow of working capital of an organization. It comprises both cash and non-monetary factors. A fund flow statement is prepared periodically, like monthly or quarterly, to help in long-term financial planning. The scope of fund flow statements is as follows:

• It captures the difference in working capital.
• It helps in understanding the financial position of the firm in totality.
• The analysis is done for a longer period and is helpful for capital budgeting.

 

Cash Flow vs Fund Flow: Main Differences

The main differences between cash flow vs fund flow are as follows:

Cash Flow Statement	Fund Flow Statement
Shows the inflow & outflow of only cash during a specific period	Shows the variations in the working capital over a period
Assists in cash budgeting	Assists in capital budgeting
Helps find out the net cash flow of the company	Helps determine financial position of company
Records the changes in the opening and closing balance of cash	Captures the source and application of funds
Discloses all kinds of cash inflow and out and its equivalent	Discloses and identifies every source that generates funds
Cash flow is a key part of the financial statement	Fund flow is not a part of the financial statement
Used for short-term financial decision-making	Used to make long-term decision-making

 

Benefits and Drawbacks of Cash Flow Statement

The key benefits and drawbacks of cash flow statement are as follows:

 

Benefits of Cash Flow Statement

• It assesses the liquidity and profitability of the businesses.
• It denotes periodic cash movement, which helps in assessing the Profit & Loss statement and the Balance Sheet.

 

Drawback of Cash Flow Statement

• The company’s revenue cannot be determined as it depicts only the cash position.
• It does not represent the liquidity position of a company as it presents only the cash position at the end of the period.
• It doesn’t help in determining the future/projected cash flows as it is prepared based on historical costs.

 

Benefits and Drawbacks of Fund Flow Statement

The key benefits and drawbacks of fund flow statement are as follows:

 

Benefits of Fund Flow Statement

• It helps to decide on resource utilization and facilitate the appropriate allocation of limited resources.
• It gives an understanding of the company’s capacity for fund generation and guides the management toward a future course of action.
• The fund flow statement gives information about the usage of the company’s working capital.

 

Drawbacks of Fund Flow Statement

• It does not provide a company’s real-time financial status or prospects as it deals with historical data.
• It excludes non-cash elements such as depreciation and considers solely cash transactions.

 

Conclusion

The basic difference between Cash flow vs Fund flow is the nature of the financial movement. They help an investor with a demat account to evaluate the company’s current financial position. Like this and many other strategies, investors must also know 'how to transfer shares from one demat to another online' for investment management.