Understanding Investing Activities: How Acquiring and Disposing of Long-term Assets and Investments Affects a Company’s Cash Flow

The purchase and sale of long-term assets and current investments are classified as

investing activities.

The purchase and sale of long-term assets and current investments are classified as investing activities on the statement of cash flows.

Investing activities are transactions that involve the acquisition or disposal of long-term assets or current investments. Long-term assets are assets that are expected to provide a benefit for more than one year, such as property, plant, and equipment or intangible assets. Current investments are investments that can be easily converted to cash within one year, such as stocks and bonds.

Examples of investing activities include purchasing or selling property, plant, and equipment, acquiring or disposing of intangible assets, purchasing or selling investments in other companies, and making loans to other entities.

Investing activities have a significant impact on a company’s cash flow as they involve a significant outflow or inflow of cash. Therefore, the statement of cash flows provides important information about a company’s investing activities that can help investors and other stakeholders evaluate the company’s ability to generate cash and invest in long-term growth opportunities.

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