About

Funds Flow Statement

A Foreigner’s Guide to the Turkish Funds Flow Statement
This statement is essentially a "Sources and Uses" table. It reveals the strategic financial decisions of the management, specifically whether they are matching their borrowing maturity with their investment maturity.
1. The Structure: Sources vs. Uses
It doesn't look like a flow chart; it looks like a balance scale with two sides.
A. Sources of Funds (Fon Kaynakları)
Where did the resources come from?

1. Operations: Net Profit + Depreciation (Amortisman).
2. Financing: Capital Increases (Sermaye Artırımı), New Loans Taken.
3. Asset Liquidation: Selling fixed assets or reducing inventory.

B. Uses of Funds (Fon Kullanımları)
Where were the resources spent?

1. Operations: Net Loss.
2. Distributions: Dividends paid, Taxes paid.
3. Investments: Buying new Machinery/Factories (CapEx).
4. Deleveraging: Repaying loans.
5. Working Capital: Increasing Inventory or Receivables.

2. "Pill Info" (Key Insights) for Foreigners
a. The Definition of "Fund" (Fon)
In Turkish accounting context, "Fund" usually doesn't just mean money in the bank. It means All Financial Resources.

• Crucial Distinction: In this table, Depreciation (Amortisman) is listed as a "Source of Funds."
• Why? Because depreciation is an expense that does not require a cash outflow. Therefore, it is considered a fund generated within the company. Foreigners often find it confusing to see "Amortization" listed as a source of money.

b. The "Maturity Mismatch" Detector
This is the #1 reason to look at this statement in Turkey.

• The Sin: Did the company use Short-Term Sources (e.g., a 3-month loan) to fund Long-Term Uses (e.g., building a factory)?
• The Result: This is the classic Turkish bankruptcy recipe. The Funds Flow Statement reveals this error instantly.

c. VUK Requirement
While IFRS ignores this, Turkish Tax Law (VUK) technically lists this as a supplementary statement for companies of a certain size. You will often see it in the back pages of a detailed "Kurumlar Vergisi Beyannamesi" (Corporate Tax Return) package.
3. Tips for Easier Analysis
Tip 1: The "Internal vs. External" Ratio
Look at the Sources side.

• Question: What percentage of funds is generated Internally (Profit + Depreciation) vs. Externally (Loans + Capital Injection)?
• Turkish Reality: Sustainable Turkish companies usually have high "Depreciation" as a source. If the only source of funds is "Short Term Bank Loans" (Kısa Vadeli Banka Kredileri), the company is on life support.

Tip 2: Working Capital Leaks
Look at the Uses side.

• If a large portion of funds is used for "Increase in Current Assets" (Dönen Varlıkların Artışı), ask:
• Is this good growth (more inventory for more sales)?
• Or is it bad management (unsold stock piling up)?
• The Funds Flow Statement highlights changes in working capital explicitly.

Tip 3: The "Capital Injection" Bluff
Sometimes owners say, "We injected capital."

• Check the Sources section. If you see "Capital Increase" (Sermaye Artırımı) but also see an equal amount in Uses under "Decrease in Short Term Debts to Shareholders," it’s a fake injection. They just converted debt to equity to make the balance sheet look pretty. No fresh funds entered.

4. Mini Dictionary (TR - EN)

Summary: When to Use This?
Honestly? Rarely.

• Use the Cash Flow Statement to understand if they can pay bills next week.
• Use the Funds Flow Statement only if you are doing a deep historical analysis of how the company grew over the last 5 years (e.g., "Did they grow by borrowing or by earning?").

Funds Flow Statement