![]() ![]() Qualitative nature of the investments made by the company Going a step further would be to understand how that return is then distributed amongst various stakeholders, a component of cash flow from financing activities.Ģ. ![]() ![]() In any case, what is important is that the return on investment is greater than the cost of capital. One should observe whether the investments made by the company are coming on the back of sufficient cash flow from operations or retained earnings, or whether the company has borrowed money or raised additional capital to raise the money needed for the investments made. Source of investments made during the yearĬash flow from Investing activity is generally a negative cash flow component of the cash flow statement. It may be noted that investment in securities or other assets, unrelated to the core business of the company, is not always an indicator of an unfocused growth strategy but in some cases, indicates that the funds are being parked or kept aside for future expansion plans or for the purpose of diversifying risk in the business.Ĭheck Points: 1. In case of finance companies, investment in securities or other investment products could be a core business activity. The cash could be employed by investing in assets such as new plant and machinery suitable for increasing the operational productivity and business profits, or in non-principal activities by investing in securities or giving loans and advances to third parties etc. Cash Flow from Investing Activities is an indicator of how businesses employ their cash. The cash flow statement is divided into three parts:Ĭash flow from Investing activities highlights the usage of the capital of business in terms of capex done, investment in securities etc. The Cash Flow Statement is a detailed statement of changes in cash and cash equivalents during the year. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |