Capital expenditures are reported in which cash flow section?

Capital expenditures are reported in which cash flow section?

• A. Investing
• B. Financing
• C. Operations
• D. Beginning cash balance

Answer: (A)

Capital expenditures are cash outlays for buying or upgrading long-term assets like property, plant, and equipment. On the cash flow statement, cash flows are divided into three sections: operating activities, investing activities, and financing activities. The purchase of long-term assets is classified as an investing activity because it represents an investment in the business’s productive capacity, not the day-to-day operations or the financing of the business. The actual cash effect appears under investing activities. Depreciation and amortization affect operating cash flow as non-cash adjustments, but the cash spent to acquire the asset sits in investing activities. Financing activities, on the other hand, cover borrowing, repayment of debt, issuing or repurchasing stock, and paying dividends, while the beginning cash balance is simply the starting point for the cash flow statement, not a category of cash flows.

Capital expenditures are cash outlays for buying or upgrading long-term assets like property, plant, and equipment. On the cash flow statement, cash flows are divided into three sections: operating activities, investing activities, and financing activities. The purchase of long-term assets is classified as an investing activity because it represents an investment in the business’s productive capacity, not the day-to-day operations or the financing of the business. The actual cash effect appears under investing activities.

Depreciation and amortization affect operating cash flow as non-cash adjustments, but the cash spent to acquire the asset sits in investing activities. Financing activities, on the other hand, cover borrowing, repayment of debt, issuing or repurchasing stock, and paying dividends, while the beginning cash balance is simply the starting point for the cash flow statement, not a category of cash flows.