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Cash flow from investing activities is a section of a company’s cash flow statement that displays how much money has been used in (or generated from) making investments during a specific time period. It is important because it shows how a company is allocating cash for the long term, such as investing in fixed assets like property, plant, and equipment to grow the business .
The cash flow statement is one of the most important financial statements for investors and analysts. It provides information about the cash inflows and outflows of a company over a specific period of time. The statement is divided into three categories: cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities .
Cash flow from investing activities is considered the most important category on the statement of cash flows because it is considered the best measure of expected income . This category includes capital expenditures, lending money, and the sale of investment securities. Expenditures in property, plant, and equipment fall within this category as they are a long-term investment .
Investors use the cash flow statement to evaluate a company’s liquidity and solvency. Liquidity refers to a company’s ability to meet its short-term obligations while solvency refers to its ability to meet its long-term obligations. By analyzing the cash flow statement, investors can determine whether a company has enough cash on hand to pay its bills and invest in future growth .
In conclusion, Cash Flow From Investing Activities Is Considered The Most Important Category On The Cash Flow Statement Because It Is Considered The Best Measure Of Expected Earnings. This category provides information about how much money has been used in (or generated from) making investments during a specific time period. Investors use this information to evaluate a company’s liquidity and solvency .
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2. https://www.investopedia.com/terms/c/cashflowfinvestingactivities.asp
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