Difference between Cash Flow Analysis and Flow Fund Analysis
- The fund from operation comes under the fund flow statement whereas cash from operation comes under the cash flow statement.
- After getting processed from different sources and uses, with an opening cash balance, the cash flow statement starts its flow and ends it with a closing cash balance. But in case of fund flow statement, there are no opening and closing of cash balances.
- One of the important constituents of working capital is cash. Apart from dealing with it, fund flow statement also deals with other items accounting for working capital. In case of cash flow statement, the analysis is mainly concerned with actual or notional money movement.
- Within flow of cash in a firm, there will definitely be an inflow of funds. But it is not necessary that a sound fund position is similar to sound cash position.
- If the financial planning and decisions are made on long term basis, fund flow statement is a suitable choice. But if the decisions are related to short term financial planning, the fitting choice would be cash flow statement.
- To find out an increase or decrease in working capital, individual statements are prepared under the fund flow.
- The reasons for changes in cash receipt and cash payment is explained via a cash flow statement. In the case of fund flow statement, mainly the indication is related to the reasons of changes in net working capital.