What is a Cash Flow Statement? How is it different from a funds flow statement?
Cash Flow Statement is the statement which shows changes in inflow & outflow of cash during the period. There are two methods of the cash flow representation:-
1) Direct Method: includes operating Activities, Investment Activities and Financial Activities
2) Indirect Method: uses net income as base & makes adjustments to that income (cash & non-cash) transactions.
In various aspects Cash flow statement is different from Funds flow statement. Cash flow statement allows investors to understand how a company's operations are running, where its money is coming from, and how this money will be spent by the company. On the other hand, fund flow statement shows the future activities of the company.
Cash flow statement is an analysis tool used by large and medium scale companies for Inflow and Outflow of money during a particular period of time whereas Fund flow shows the flow of money from different activities where the flow has to be represented during the funds calculations.