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Difference Between Cash Flow Analysis and Flow Fund Analysis

DIFFERENCE BETWEEN CASH FLOW ANALYSIS AND FUND FLOW ANALYSIS 

  1. Cash flow statement starts with the opening cash balance and ends with the closing cash balance by processing through various sources and uses. But there is no opening and closing balances in fund flow statement.
  2. Cash from operation can be found out under the cash flow statement. But fund from operation can be found out under the fund flow statement.
  3. Separate statements are prepared for the purpose of finding out increase or decrease in working capital under the fund flow statement. But no separate statements for increase or decrease in working capital are prepared in cash flow analysis.
  4. A cash flow statement explains the causes for the changes in cash and bank balances i.e., cash receipts and cash payments alone. But fund flow statement indicates the causes for the changes in net working capital.
  5. Cash flow statement is suitable for short term financial planning and decision, while fund flow statement is appropriate for long term financial planning and decisions.
  6. Cash flow analysis deals with the movement of actual or notional cash. But fund flow statement deals with not only cash but also the items constituting working capital. Cash is one of the components of working capital.
  7. Whenever, wherever there is inflow of cash there will definitely be inflow of funds. But sound fund position need not be a sound cash position.