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 generate positive 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?