Cash Flow from Investing

Investing activities include buying and selling property, plant and equipment, buying and selling other businesses, and buying and selling investments such as shares and bonds of other companies.

For a growing business, cash flow from investing is usually negative, because the company is spending money on new equipment, buildings or acquisitions. For example, a company might spend 8 million on new machinery and receive 1 million from selling old vehicles, giving net cash used in investing activities of 7 million.

A negative figure is not necessarily bad. It often means the company is investing in its future. A positive figure can mean the company is selling assets, which might be a sensible clear-out of unneeded property or a sign it needs cash.

Analysts compare investing cash flows with operating cash flows. A company whose operations generate enough cash to fund its investments is in a strong position. One that must borrow or raise new equity to keep investing is more dependent on outside funding.