A:

A company with a negative cash flow from investing activities should be evaluated on the sources and uses of cash under its cash flow from investing activities.

Although companies and investors normally want to see a positive cash flow from all of a company's operations, having a negative cash flow from investing activities is not always bad and needs further evaluation before decisions are made on a company's investing activities.

A company's cash flow from investing activities is the part of that company's cash flow statement where the total sum of changes in regard to its investment gains and losses over a specified time period. Items in a company's cash flow from investing activities include the purchase or sale of assets, the purchase or sale of investment products, and the lending of money or collection of loans.

It's entirely possible and not uncommon for a growing company to have a negative cash flow from investing activities. For example, if a growing company decides to invest in long-term fixed assets, it will appear as a negative use of cash within that company's cash flow from investing activities. Although investments in long-term assets such as property and equipment might make the investing activities negative, it's actually a good thing that the company is investing in growth.

On the other hand, if a company has a negative cash flow from investing activities because it has made poor asset-purchasing decisions, then it's possible that the negative cash flow from investing activities signals that the company is a poor performer.

Evaluate the sources and uses of a company's cash flow from investing activities, since a negative or positive cash flow is not inherently good or bad.

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