Understanding Cash Flow and Fund Flow Statement.
                     UNDERSTANDING CASH FLOW AND 
FUND FLOW STATEMENT
Cash Flow Statement
• A Cash Flow Statement is a statement showing changes in cash position of 
the firm from one period to another. It explains the inflows (receipts) and 
outflows (disbursements) of cash over a period of time.
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SOURCES OF CASH FLOW
Operating activities
• Cash generation and payment related to core operations of a business is 
recorded as sourced from operating activities.
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Investing activities
• Any long term investments made, such as the purchase of fixed assets or 
debts paid in cash are recorded under investing activities.
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Financing activities
• Cash involved in raising capital via debt or equity financing, along with 
payments met in the form of dividends, are identified as sourcing from 
financing activities.
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What is Fund Flow?
• Fund flow is typically referred to as the working capital of a business and is 
analyzed to identify and determine the changes in the working capital for a 
given period along with its reasons.
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SOURCES OF FUND FLOW
Fund flow in business operations
• The changes to a company’s working capital can be made in various ways. 
Mostly, the sources of fund inflow can include share or debenture issue, 
loans availed, etc.
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Funds raised for the long term through an asset sale or 
share issue
• An outflow of funds can be characterised via activities like fixed asset 
purchase, share or debenture redemption, a payback of loans, etc. These 
changes are thus either recorded under funds from business operations or as 
long term funds.
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Accounting method
Cash Flow
Accounting for cash flow Fund Flow
is done only when liquid Fund flow is accounted 
cash is involved in the on the basis of accrual of 
form of currency or funds and not actual 
bank transfer.
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Utility
Cash flow is used to Use of fund flow extends 
identify the net cash flow to the understanding of a 
of a business for a given company’s overall 
period. financial standing.
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Analysis of business position
Cash flow calculation 
Calculation of funds flow 
helps identify a business’s 
helps assess a business’s 
liquidity position for the 
short term. position in the long term.
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