Cash Flow From Investing Activities

Definition: Cash Flow From Investing Activities is a category in the cash flow statement that reports the change to a company's cash flow from its investments. Examples of investing activities include: purchase or sale of tangible assets (e.g., land, equipment, motor vehicle, marketable securities, etc); purchase of investments; payments related to mergers and acquisitions; etc.

Example:
Beta Ltd. was founded on 1 January 2010. During the year ended 31 December 2010, the following transactions took place:
- Sold furniture and fittings costing $50,000 for $25,000 cash.
- Bought new furniture for $80,000.
- Purchased new office equipment $60,000.
- Purchased new building $200,000.
- Invested in short term liquid assets $40,000.
- Purchased $300,000 10% Debentures in Gamma Ltd at 95.
Calculate the Net Cash Flow From Investing Activities.

Solution:
Net Cash Flow From Investing Activities = 25,000 - 80,000 - 60,000 - 200,000 - 40,000 - (300,000 * 95 / 100) = - $640,000 (cash outflow)

* Next: Cash Flow from Financing Activities

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