What is “Cash Flow from Investing Activities”?A company lists any investments made with cash on its cash flow statement. This section represents the amount of cash used or generated from investment-related activities in a specific period. Show
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. Other items to include are a sale of a division, proceeds from the sale of PP&E, and proceeds from the sale of marketable securities and other businesses. Some companies will have items not mentioned above, so it’s important to look at the balance sheet of a company to determine the line items.  The Coca-Cola Company – Cash Flow from Investing Activities Extract Key Learning Products
FormulaCash Flow from Investing Activities = (Purchase)/Sale of Long-Term Assets (Capex) + (Purchase)/Sale of Other Businesses (M&A) + (Purchase)/Sale of Marketable Securities ExampleCompany XYZ had the following transactions for year-ending 20X7: The above example would reflect in the investing activities of a cash flow statement as: Points to Note
What Not to Include in Investing Activities
Why is Cash Flow from Investing Activities Important?Although a company may report a negative cash flow in investing activities, it doesn’t necessarily mean that it’s going to have a negative impact on the business. In the short-term, the company has faced a negative impact on cash flow due to the purchase of property, plant and equipment, but in the long-term the assets could help generate growth in a company’s revenue. In summary, investing activities provide an insight into how effectively the company is keeping its asset base up to date, and investing for future growth. For all questions assume that the indirect method is used. There are four parts to the Statement of Cash Flows (or Cash Flow Statement): For each of the following items, indicate which part will be affected. Depreciation Expense. Proceeds from the sale of equipment used in the business. The Loss on the Sale of Equipment in Question #2. Declaration and payment of dividends on company's stock. Gain on the Sale of Automobile formerly used in the business. The proceeds from the sale of the automobile in Item #5. An increase in the balance in a retailer's Merchandise Inventory. An increase in the balance in Accounts Payable. Retirement of long-term Bonds Payable. Purchase of Treasury Stock (company's own stock). The purchase of a new delivery truck to be used in the business. A decrease in the balance of Accounts Receivable. An increase in Bonds Payable (a long-term liability). A decrease in the current asset account Prepaid Insurance. A decrease in the current liability Income Taxes Payable. The proceeds from issuing additional Common Stock. The amortization of the cost of an intangible asset. The exchange/conversion of long-term bonds into common stock. For items 19 - 30 indicate whether they will have a positive or negative EFFECT ON CASH. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement. A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement. An increase in the balance of Prepaid Insurance. A decrease in Supplies on hand. The proceeds from the sale of equipment formerly used in the business. The Loss on the Sale of Equipment in the previous question. An increase in the current liability Income Taxes Payable. A decrease in Accounts Payable. An increase in Accounts Receivable. An increase in the current liability Warranty Liability. Dividends declared and paid. Proceeds from the issuance of Preferred Stock. The Gain on the Sale of Equipment formerly used in the business. An increase in the long-term asset Investment in Another Company. For a recent year a corporation's financial statements reported the following:
Based on the above information, what amount will the corporation report as Net Cash Provided by Operating Activities on the cash flow statement? A corporation reported the following information for the past year:
Assuming these are the only facts, what amount will the corporation report as the Net Cash Provided by Operating Activities on the cash flow statement? Using the information in Question #32, what amount will be reported under Cash From Investing Activities? Want more practice questions? What are some investing activities reported on the statement of cash flows?The activities included in cash flow from investing actives are capital expenditures, lending money, and the sale of investment securities. Along with this, expenditures in property, plant, and equipment fall within this category as they are a long-term investment.
Which of the following is classified as an investing activity on the statement of cash flows?Dividends paid to the company's own stockholders. In a statement of cash flows, which of the following would be classified as an investing activity? The sale of the company's own common stock for cash.
Which is an example of a cash flow from an investing activity?An example of cash flow from investing activity is sale of investment by non-financial enterprise.
What are examples of investing activities?Investing activities include purchases of long-term assets (such as property, plant, and equipment), acquisitions of other businesses, and investments in marketable securities (stocks and bonds).
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