What is a Fund Flow Statement?

Authored by
Team Espresso
May 26 2023
6 min read

A Fund Flow Statement is a financial statement that shows the inflow and outflow of funds of a company. It is often measured every quarter or year, and the report is released in set intervals. Along with a Cash Flow Statement, balance sheet, and profit and loss statement, a Fund Flow Statement provides a peek into the financial health of a company. 

A Fund Flow Statement reveals two important aspects of a company: its source of funds, that is, how the funds were generated, and, the application of funds, that is, where those funds have been used. 

Why prepare a Fund Flow Statement 

Although profit and loss statements and balance sheets are important in their own way, they do not show some vital aspects of a company’s finances. 

For instance, they do not explain the causes of changes in a company's financial status. For that, you need a Fund Flow Statement. A Fund Flow Statement, when read with other statements, shows a clearer picture of the company’s financial health. 

Fund Flow Statement vs Cash Flow Statement

For a layman, a Cash Flow Statement and a Fund Flow Statement may sound similar. However, both are fundamentally different from each other. A Cash Flow Statement shows just the changes in a company’s funds over a period of time. More specifically, it shows the inflow and outflow of cash from operating activities, the inflow and outflow of cash from investing activities, and the inflow and outflow of cash from financing activities. 

However, a Fund Flow Statement is much more comprehensive than a Cash Flow Statement. It shows the reasons behind the changes in assets and liabilities over a time period. This includes changes in cash, receivables, and inventory on the asset side and payables on the liability side. 

Here’s a simple example. If a company records an increase of Rs 22 crore in receivables (which refers to the fund that a company should have received for the services provided but is yet to receive) from the last quarter to the current quarter, it will not reflect in its Cash Flow Statement because the inflow of funds is yet to occur. However, because the company will receive these funds soon, the increase will be reflected in the Fund Flow Statement.

Some factors on which they can be differentiated:  


A Fund Flow Statement delves into the various sources from where a company generates its funds over a period and reflects how those funds were used in the same period A Cash Flow Statement starts with the opening cash balance of a company and ends with the closing cash balance while recording how the cash was generated and how it was used 


A Fund Flow Statement is much broader in scope and analyses the working capital of a business. A Cash Flow Statement focuses on a single aspect, cash, which is just one of the elements of working capital.


A Fund Flow Statement is more useful if an analyst wants to assess how efficient a company is in managing its working capital. A Cash Flow Statement is mainly used to assess the short-term liquidity position of a company 

End result: 

A Fund Flow Statement explains the causes of changes or fluctuations in a company's net working capital. A Cash Flow Statement shows the reasons behind the change in the cash position of a company. 

What is a Fund Flow Statement analysis? 

As the phrase suggests, a Fund Flow Statement analysis is an analysis of how the working capital of a company, or a group of companies, has changed over several periods. The same shows how efficient the company is in managing its working capital. 

Analysts usually analyse several years of a company’s data to get a clearer picture of how funds are used and received by the company. An analysis of the same also reveals what kind of challenges a company faces periodically and how efficiently it tackles them. 

For instance, a Fund Flow Statement shows how many days, on average, a company takes to clear its inventory. The longer a company has to hold its inventory, the less efficient it is, and vice versa. Similarly, a Fund Flow Statement also reveals, on average, how many days it takes for a company to get cash after an invoice has been generated. The fewer the days, the better the company is at managing its resources. 

A fundamental analyst will compare such data points for several companies within a sector, and compare them to understand which companies are better managed than the others. They may then decide to invest in a company based on their analysis. 

Usage and limitations of Fund Flow Statement 

A Fund Flow Statement has several uses: 

Explains the financial consequences of business operations: 

A Fund Flow Statement is an illuminating document that presents a clearer picture of the financial strength and weaknesses of a company. For example, if a company reports a large profit but its cash positions are weak, then a Fund Flow Statement will reveal the reason behind that. 

Gauges efficiency: 

A Fund Flow Statement also reveals how efficient a company is, which can be used by analysts to understand the nitty-gritty of how funds are used. A bank may also use this information to assess the creditworthiness of a company. 

A window to the future: 

Sometimes, a company uses a Fund Flow Statement to understand how it can allocate its resources in the future, or whether or not it has enough resources at hand to plan for future needs. 

Limitations of a Fund Flow Statement as well: 

Historical data: 

A Fund Flow Statement is prepared based on historical data. It does not accurately reveal how a company will perform in the future. 

A crude statement: 

A Fund Flow Statement looks at the working capital of a company at an objective level. This sometimes misses nuances and the nature of any particular challenges that a company may be facing. 

In conclusion, the Fund Flow Statement plays a vital role in understanding a company’s financial dynamics. It facilitates informed decision-making, strategic planning, and evaluation of financial health. By comprehending its components and analysing the statement, you can make sound financial decisions and navigate the complex financials of any company.  


Q. What is working capital? 

Working capital is the difference between a company's current assets and current liabilities. Understanding how the working capital of a company is positioned helps the company plan better for its short-term needs. 

Q. What is Free Cash Flow? 

Free Cash Flow (FCF) is the cash a company generates after deducting cash outflows for its operations and maintaining its capital assets. It is the cash available for a company to pay for short-term needs, for example, paying dividends. 

Capital expenditures, also known as capex, are expenditures a company makes with the purpose of acquiring, maintaining, or upgrading long-term assets. Revenue expenditures, also called operational expenses, or opex, refer to expenses that a company incurs to maintain its day-to-day business operations.


Preference shares are a type of equity that provides shareholders with preferential rights, such as priority in receiving dividends and assets in the event of liquidation. They offer investors a fixed dividend payout and a higher claim on company assets compared to common shareholders.