What is Cash Flow from Investing Activities? (2024)

FAQs

What is Cash Flow from Investing Activities? ›

Key Takeaways. Cash flow from investing activities is a section of the cash flow statement that shows the cash generated or spent relating to investment activities. Investing activities include purchases of physical assets, investments in securities, or the sale of securities or assets.

Cash flow from investing activities involves long-term uses of cash. The purchase or sale of a fixed asset like property, plant, or equipment would be an investing activity. Also, proceeds from the sale of a division or cash out as a result of a merger or acquisition would fall under investing activities.

Investing activities can include:

Proceeds from the sale of other businesses (divestitures) Purchases of marketable securities (i.e., stocks, bonds, etc.) Proceeds from the sale of marketable securities.

Investing Cash Flow is calculated by subtracting the cash outflows from the cash inflows related to investing activities during a given period.

Cash Flow from Investing: Format and Line Items

Items reported on a cash flow statement for investing activities include purchases of long-term assets such as property, plant, and equipment (PP&E), investments in marketable securities such as stocks and bonds, as well as acquisitions of other businesses (M&A).

Cash flows from investing activities always relate to either long-term debt or equity transactions and may involve increases or decreases in cash relating to these transactions. Which method calculates the interest expense that allocates the same amount ...

A negative investing cash flow ratio means that a company spends more of its operating cash flow on its investing activities than it receives from them. A positive investing cash flow ratio means that a company receives more of its operating cash flow from its investing activities than it spends on them.

The receipt of loan repayments is an investing activity on the statement of cash flows.

Answer and Explanation:

The marketable securities are considered as the cash equivalent because of very short maturity and high liquidity. And hence sale and purchase of marketable securities are considered as the cash and cash equivalents and are not considered as investing activities.

Examples of common cash flow items stemming from a firm's financing activities are: Receiving cash from issuing stock or spending cash to repurchase shares. Receiving cash from issuing debt or paying down debt. Paying cash dividends to shareholders.

What is an example of a cash flow? ›

What is a cash flow example? Examples of cash flow include: receiving payments from customers for goods or services, paying employees' wages, investing in new equipment or property, taking out a loan, and receiving dividends from investments.

A cash flow statement provides data regarding all cash inflows that a company receives from its ongoing operations and external investment sources. The cash flow statement includes cash made by the business through operations, investment, and financing—the sum of which is called net cash flow.

Cash inflows (proceeds) from investing activities include:

Cash receipts from collections of loans (except for program loans) and sales of other agencies' debt instruments. Cash receipts from sales of equity instruments and returns from investments in those instruments.

Positive and Negative Cash Flow from Investing Activities

Purchasing stocks, bonds, securities, debentures, and other instruments – negative cash flow. Selling off or leasing out fixed assets, including plants and machinery – positive cash flow. Selling off securities within a brief time bracket – positive cash flow.

Investing activities are one of the main categories of net cash activities that businesses report on the cash flow statement. Investing activities in accounting refers to the purchase and sale of long-term assets and other business investments, within a specific reporting period.

Cash flow from investing (CFI) or investing cash flow reports how much cash has been generated or spent from various investment-related activities in a specific period. Investing activities include purchases of speculative assets, investments in securities, or sales of securities or assets.

Net cash provided by Investing activities measures the cash inflows and outflows related to investment activities during a given period, such as purchases and sales of fixed assets, investments in securities, and acquisitions.

The items in cash inflow from financing activities usually include the following: Issuance of ordinary shares. Issuance of preference shares. Issuance of debentures and bonds.

If cash flow is positive, that means the business has engaged in more new debt or equity financing activities that bring cash in than it engaged in debt repayments. This is a great thing for cash on hand, as it may allow the business to expand, or stay alive during early-stage product development.