Investing cash flows
In one sentenceCash coming into or going out of the business from buying or selling long-term assets, such as equipment, buildings, vehicles and investments.
Simply put
This section of the statement of cash flows shows how much the business spent on building its future capacity. Buying new equipment is a cash outflow, and selling an old car is a cash inflow.
A negative figure here is not bad in itself: a growing business spends more on assets than it sells. What matters is that it has a source to cover it from operations or financing.
Worked example
A food factory bought a packaging line for 300,000 SAR in cash, and sold an old delivery vehicle for 40,000 SAR.
Purchase of the packaging line(300,000)
Sale of the delivery vehicle40,000
Net investing cash flow = 40,000 − 300,000(260,000) SAR
Formula: Proceeds from selling assets and investments − amounts paid to buy them
Don't confuse it with
Operating cash flowsBuying goods for resale is operating, while buying equipment used for years is investing.