The cash flow from investment is listed in the company’s cash flow statement. Cash flows from investment activities include cash inflows or outflows from the company’s long-term investments.
The cash flow statement reports the amount of cash and cash equivalents leaving and entering the company.
The part of the cash flow statement is:
The cash flow statement can be used to measure how a company effectively manages cash from operating activities or daily operating expenses, as well as its financing activities, and how to manage debt and equity.
Cash flows from investment activities involve the long-term use of cash. The purchase or sale of fixed assets such as real estate, plant or equipment is an investment activity. In addition, the proceeds from the sale of divisions or cash out due to mergers or acquisitions also belong to investment activities.
Any changes in the company’s cash position involving assets, investments or equipment will be listed under investment activities.
The company wants to generate positive cash flow. However, the company may have negative cash flow, even if it is a profitable company. For example, a company may invest heavily in plant and equipment to develop its business. These long-term purchases will be negative cash flow, but positive in the long run.
For more information about cash flow and how companies use cash flow statements, please read What is a cash flow statement?