Cash flow from investing is listed on a company's cash flow statement. Cash flow from investing activities includes any inflows or outflows of cash from a company's long-term investments.
The cash flow statement reports the amount of cash and cash equivalents leaving and entering a company.
The sections of the cash flow statement are:
- Cash from operating activities
- Cash from investing activities
- Cash from financing activities
The cash flow statement is useful in measuring how effectively a company manages its cash from operating activities, or day-to-day operating expenses, and its financing activities, how debt and equity is managed.
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.
Any changes in the cash position of a company that involves assets, investments, or equipment would be listed under investing activities.
Companies look to generatepositive cash flow. However,companies can have negative cash flow, even profitable companies. For example, a company might be investing heavily in plant and equipment to grow the business. These long-term purchases would be cash-flow negative, but a positive in the long-term.
For more on cash flow and how companies utilize the cash flow statement, please read What Is A Cash Flow Statement?
