Cash flows from investing activities

One of the reasons why it’s important to have positive cash flows from operations arises from the fact that for sustainability your company at some point needs to invest. The investments may be smaller and regular or substantial and take place less often, however the fact remains that to keep the business going at one point you will require investments. 

Investments are mostly made to equipment, property. They may be made to assets like loan receivables and other companies, but most often they indeed are needed for your own equipment. Money that you can use for the investment comes from one of the two sources – either from your operations as mentioned above or from acquiring financing, i.e. a loan or a finance lease.

Cash flows from investing activities also include those arising from sale of the property and equipment that was once invested in.

It should also be noted that cash flows from investing activities are shown using the direct method. There are no balances as such so there cannot be changes in those balances to be shown as investment cash flows.