Cash Flow vs. Fund Flow: What’s the Difference?

Cash Flow vs. Fund Flow: An Overview

Cash flow is the term used to refer to how cash comes into and out of a business. In the U.S., the term fund flow previously referred to working capital increases and decreases; currently, it is used to refer to capital flowing into and out of financial assets like mutual funds or other investments.

Fund flows are also tracked during mergers and acquisitions (M&A) and reported on a statement at an M&A closing.

Cash Flow

Cash flow is the inflow and outflow of cash and cash equivalents from a company’s operational activities. They receive inflows of cash revenue from selling goods, providing services, selling assets, earning interest on investments, rent, borrowing, or issuing new shares. Cash outflows can result from making purchases, paying back loans, expanding operations, paying salaries, or distributing dividends.

Cash flows are recorded and reported on the statement of cash flows and are divided into three different categories:

• Cash flows from operating activities: Cash generated from the general or core operation of the business would be listed in this category.
• Cash flows from investing activities: This section covers any cash flow spent on investments like new equipment.
• Cash flows from financing activities: This category includes any transactions involving debtors, such as proceeds from new debts or dividends paid to investors.

Fund Flows

Fund flow is a measure of how much capital is moving between different investment types. For instance, during March 2025, long-term U.S. mutual funds and exchange-traded funds experienced $24 billion in inflows, defensive sector funds and gold experienced inflows at levels last witnessed when the COVID-19 pandemic began.

Fund flow is also a term used to refer to where capital flows in a merger and acquisition.

Mergers & Acquisitions

Fund flows are tracked during mergers and acquisitions. The M&A fund flow statement is a highly detailed list of where money comes from and goes to when the M&A process is completed.

Some fund flow statement categories used in M&As are:

• Opening balance of funds
• Sources of funds
• Application of funds
• Net change in funds
• Working capital changes
• Net working capital

Old Fund Flow Statement

In the U.S., GAAP previously required a statement called the fund flow statement between 1971 and 1987. When required, the statement of fund flow was used by accountants to report any changes in balance sheet line items, primarily regarding net working capital, or the difference between assets and liabilities. It was replaced by the statement of cash flows in 1988.

The Bottom Line

In the U.S., the fund flow statement was the earlier version of the statement of cash flows. The statement of cash flows more clearly demonstrates where cash is coming from and going to, and is required by GAAP and IFRS (International Financial Reporting Standards).

Fund flow refers to the amount of capital flowing into and out of investment funds, and where capital flows in a merger and acquisition.