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Cash Flow vs Fund Flow | Top Differences You Must Know! - YouTube
Channel: WallStreetMojo
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hello everyone hi welcome to the channel
of Wallstreetmojo. Watch the video
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till the end and also if you are new to
this channel then you can subscribe us
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by clicking the bell icon. Friends today we
have a topic that's cashflow vs fund
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flow we are going to understand the topic
8 differences with the help of the
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infographics. At the very initial end you
need to understand what is the cash flow
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and the fund flow statement I mean many
times you know people they really are
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not able to come up with the difference
between the two but probably they both
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differ in many other directions and the
horizons in which they fall. The cash
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flow they both have their own format
which they work. The cash flow and the
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fund flow
they're completely different statement
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they have their own scopes and serves
different purpose. Cash flow you know you
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can say is one of the four important
financial statements and every investor
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should look at it's quite prevalent and
useful when one wants to know about the
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liquidity position of the company. On the
other hand fund flow statement talks
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about the financial position for company
in a given period of time so it talks
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about sources of funds, application of
funds and so on and so forth so in this
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tutorial we look at the comparative
analysis between cash flow and the fund
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flow so that we can get idea about
the cash flow and fund flow statement
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and how useful they are in in terms of
the practical situation. We will try and
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understand this with the help of
the infographic so that we have really
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much a better idea regarding this. Now
what is the inherent meaning see cash
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flow is based on a very narrow concept
which is called cash it will stick to
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the word cash because everything that
will be involved will be in terms of
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cash that's why it is called as cash
flow statement. Fund flow is based on
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wider concept like working capital so
that is also one important part that has
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been incorporated here but what exactly
is the usefulness see the utility of the
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cash flow statement is to find out the
net cash flows that has you know cash
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flow from the operations, investing,
financing all three when combined with
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all the positive negative figures you
get the final answer the utility of the
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fund flow is to understand the financial
position of the company the financial
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position of the company so that's the
usefulness now what's the source cash
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flow statement starts with the
opening balance and after adjustment
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comes out with the net cash inflows and
outflows the opening balance and we add
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all the operating or the investing
financing and the final amount that we
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receive as the net cash flow that is the
outflow at the inflow that is the
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outbound in the inbound cash flows. Fund
flow statement computes the difference
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between the sources of funds and
application of funds. Now what is the
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difference between the sources and the
application sources means the funds
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where they are coming from and you are
applying that funds to for the other
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purpose for which it is supposed to be
expended now the working capital shown
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it is shown in the operating activities
of the cash flow statement where there
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is a difference of the changes in the
working capital are been adjusted in the
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net income which is which comes into the
indirect method of cash flow statement
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but over here it is shown in the
statement of changes in working capital
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it is shown in the changes in the
working capital now what are the type of
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the accounting see it follows cash base
the name itself suggests cash flow
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statement so it's just a cash basis
accounting and over here they follow the
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accrual basis of accounting so even that
type works cash basis and accrual basis
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of accounting those are the two types
now what effect or the impact does it
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have so through cash flow analysis we
get to know that the net cash flow we
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get to analyze we get to know the net
cash inflow or the flow and through fund
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flow analysis we get to know the changes
in the working capital so over here what
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exactly is going to be the net cash flow
that is inflow or maybe outflow or it's
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going to be positive or negative but
here the fund flow analysis we get to
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know the changes in the working capital
right from changes in inventory or
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receivables or maybe creators and so on
and so forth. Now is this is it a
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financial statement this is yes this is
no absolutely this is a very important
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crucial part and it is also included in
the annual report of the companies so
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again this is really very important
financial statement a very important
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document you can see because it has
relevance not only in terms of the
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company but all the stakeholders and the
investors will surely be looking at this
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kind of financial statement which will
have a relevance in terms to determine
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what exactly the company is standing in
terms of their cash positions and how
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far liquid they are? What are the funds
they are using for? so all that details
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will absolutely make them more resilient
and a rock solid towards the companies
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future prospect and there's no such
financial statement over here now what
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are the terms just for the short-term
analysis of the cash flow there's a
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short-term analysis done in over here
fund flow is done for the long-term so
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why did note this has been covered up
now what exactly it is used for so it is
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used for the cash budgeting and over
here it is used for the capital
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budgeting what you can say that you know the cash flow is used for the cash
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budgeting and it helps the fund flows
for the capital budgeting because over
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here you can determine exactly you can
take the decision buy or sell of
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machinery or maybe to expand your
factory or not or maybe there are
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different decision-making criteria that
you can that fund flow statement can
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help you that is basically the capital
budgeting but if when you want to do the
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cash budget or probably you want to want
to forecast the cash for the near future
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then probably this is the most useful
thing you can never do. Cash flow
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statement we are going to make some
understand some of the important
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differences cash flow statement is one
of the four financial statement I'll
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write CFS and ffs every investor
basically you know should look at to
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understand this kind of CFS the
financial position of the company and on
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the other hand if you see the FFS on the
other hand isn't a financial statement
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it does not second you know cash flow
statement is prepared so that you know
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at the end of the particular period the
net cash flow of the company can be
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computed fund flow statement is prepared to see the sources and the uses of the
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fund for funds during a particular
period and how that changes in the funds
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that affects working capital of the company. Cash flow statement is created you know
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by following you know cash basis
accounting and fund flow statement on
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the other hand is created by following
the accrual basis of accounting fourth
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cash flow statement is used for cash
budgeting while you know fund flow
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statement is used for cap budgeting. Cash flow statement over here is prepared to
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see the short term impacts or short term
effect of the cash flow and the fund
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flow statement is prepared for the long
term purpose based on this let me make
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my final conclusion on this particular
topic after discussing all the
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differences the important key
differences and some of the analysis
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that I put forward if we compare
if we compare between the cash flow and
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the fund flow. The cash flow is more
prevalent among the investors and more
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used but if we look at separately we
will see both of them they serve a
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meaning purpose cash flow serves a
company and its investors and potential
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investor by showing exactly how much
cash is getting injected into the
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company and how much cash has been paid. On the other hand the fund flow
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statement helps a company to set up
capital budget and take necessary steps
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regarding this specific item which can
affect the sources and uses of the funds
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so that's it for this particular topic
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