Meaning of Fund Flow
Fund flow is the sum of all cash inflows/outflows from and into different financial assets. Fund flow is usually calculated on a monthly or quarterly basis; no account is taken of the output of an asset or fund. It is only the share redemptions or outflows, and share purchases or inflows.
Net inflows produce excess cash for investment managers, which in turn increases the demand for securities such as stocks and bonds.
Fund flow is centred only on cash movement, indicating the net movement after evaluating monetary fund inflows and outflows. Such transactions may include investor payments or payments made to the company in exchange for goods and services.
What is a Fund Flow Statement?
A fund flow statement is a revelation of the types of inflows/outflows experienced by the firm. It is a place where information about any fund flow operation that might be out of the ordinary, such as a higher than expected outflow due to an unusual cost, is presented.
Furthermore, it often categorizes the different types and origins of transactions to help track any changes in behaviour.
Changes in Fund Flow
When there are changes in fund flow, it reflects a change in the sentiments of a customer. This may be linked to new product launches or upgrades, recent business news, or changes in feelings about the industry as a whole.
Positive changes in the flow of funds note an increase in inflow, a reduction in outflow or a combination of the two. Conversely, the negative flow of funds indicates lower inflows, higher outflows, or both.
Although occasional changes may not be indicative of problems within the company, persistent negative fund flows may be an indication that there are some issues present, as this represents the revenue that is not sufficient to meet the company's expenses. If this trend continues, it could mean that the company must obtain a form of debt in order to continue its operations.
