Course 108: A Tour through the Cash-Flow Statement
Cash Flows from Investing Activities
In this course
1 Introduction
2 Cash Flows from Operating Activities
3 Cash Flows from Investing Activities
4 Cash Flows from Financing Activities

The second major portion of the Statement of Cash Flows is the "Cash Flow from Investing Activities" section. These are activities that involve acquiring or disposing of noncurrent assets. Below are some of the major line items that show up in this section:

Capital Expenditures. This figure represents money spent on items that last a long time such as property, plant, and equipment--basically, anything needed to keep the business running and growing at its current rate. Operating cash flow (see above) minus capital expenditures equals free cash flow, or the amount of cash the company generates after investing in its business. When capital spending increases, it often means the company is expanding by building new stores or factories.

Investment Proceeds. Companies will often take some of their excess cash and invest it in an effort to get a better return than they could in a plain old money-market fund. This figure tells how much money the company has made (or lost) on such investments.

Purchases or Spin-offs of Businesses. This figure includes any money the company made from buying or selling (spinning off) subsidiary businesses. Sometimes this figure will be in the cash flows from operating activities section, rather than here.

Next: Cash Flows from Financing Activities >>


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