Finance
Fact Checked

What is a Fund Flow?

Mary McMahon
Mary McMahon
Mary McMahon
Mary McMahon

A fund flow is a reflection of the net movement of cash, including both inflows and outflows. In some regions, companies which are publicly traded are required to file fund flow statements which provide information about the cash moving through their doors. Other companies may use such statements selectively for a variety of business and investment activities, especially in documents like prospectuses which are designed to act as profiles for future investors. When such statements are available, they can provide valuable information about a company's financial situation.

The fund flow looks at movements of cash only. This includes cash paid out for investments and other activities as well as funds received in exchange for products and services. This contrasts with other types of statements which may include things like monies promised in contracts but not yet received, along with accounts payable and receivable, which represent future movements of funds which have not actually occurred yet.

Keeping fund flow positive is beneficial because it means that people are taking in more cash than they are spending.
Keeping fund flow positive is beneficial because it means that people are taking in more cash than they are spending.

The fund flow statement will disclose the various sources of outflow and inflow. Special notes may be made if there is an aspect of the statement which is unusual or remarkable, as for example if a company had an outflow significantly higher than usual and the company wanted to provide information about this unusual expenditure. Typically the statement divides inflow and outflow into different categories which are used to subdivide different kinds of income and expenditures.

Information about fun flow can be compared against other types of financial statements and disclosures to get a more complete picture of a company's finances and situation. It can also reveal the actual level of cash on hand. Changes in fund flow can also serve as a sentiment indicator which may alert investors to changing attitudes about a company or investment product. If fund flows start to turn negative, for example, this is usually a bad sign.

People can also incorporate the concept of fund flow into personal finance. As a general rule, keeping fund flow positive is beneficial because it means that people are taking in more cash than they are spending, and thus are building up a savings which may be useful in the event of an emergency. When the flow is negative, it indicates that expenses are outstripping income, and the only way to manage this is to go into debt, which can present problems down the road as the debt becomes larger and more expensive to service.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

You might also Like

Discuss this Article

Post your comments
Login:
Forgot password?
Register:
    • Keeping fund flow positive is beneficial because it means that people are taking in more cash than they are spending.
      By: saiyood
      Keeping fund flow positive is beneficial because it means that people are taking in more cash than they are spending.