What is cash flow from investments (CFI)?

After becoming proficient in reading the cash flow from operations, it is now time for investors to understand the second part of the statement of cash flows, i.e., the cash flow from investments. This part is present between the cash flow from operations and the cash flow from financing. What is it? The cash flow from investments is a simple statement that conveys to the reader information regarding how an entity has utilised its cash resources for investment-related activities. In the context of the cash flow from investing, investment activities refer to buying and selling long-term assets such as factories, equipment, shares, and fixed deposits (FDs). Only transactions that result in a recognised asset in the balance sheet are eligible for classification as investing activities. The sum of all the gross cash flows from investing gives the reader the Net Cash from Investing, which can either be a positive number or a negative number. While a positive value represents a cash inflow, a negative value indicates a cash outflow. A key point to note is that investing activities represent money invested by the company, and any money invested in the company is classified as a financing activity. An illustration of a hypothet

This article was originally published on February 08, 2022.