Investing activities

Definition

Investing activities involve the purchase and sale of long-term assets and other investments not included in cash equivalents. These activities are a key component of a company's cash flow statement, reflecting how funds are used for growth and expansion.

5 Must Know Facts For Your Next Test

1. Investing activities include transactions related to the acquisition and disposal of long-term assets like property, plant, and equipment.
2. They also encompass the purchase and sale of securities and other investments that are not considered cash equivalents.
3. Cash outflows from investing activities generally signify company spending on capital expenditures to fuel future growth.
4. Positive cash flow from investing activities might indicate selling off assets or receiving returns on investments.
5. Net cash used in investing activities is calculated as the sum of all inflows minus outflows related to these transactions.

Review Questions

• What types of transactions are categorized under investing activities?
• How can positive cash flow from investing activities be interpreted?
• Why is it important to track net cash used in investing activities?

Related terms

Operating Activities:

Transactions related to the primary operations of a business, including revenues and expenses.

Financing Activities:

Transactions involving debt, equity, and dividends which affect a company's capital structure.

Capital Expenditures (CapEx): Funds used by a company to acquire or upgrade physical assets such as property or equipment.