Which activities are reflected in Cash Flow From Investing?

Which activities are reflected in Cash Flow From Investing?

• A. Capital expenditures and sales of long-term investments
• B. Debt and equity transactions
• C. Revenues from customers on an accrual basis
• D. Dividends paid to shareholders

Answer: (A)

Cash flows from investing reflect how a company uses and generates cash through long-term assets and investments. It includes cash outflows for capital expenditures—buying property, plant, and equipment—and cash inflows from selling long-term assets or investments. This is distinct from financing activities, which involve borrowing, repaying debt, issuing or repurchasing stock, and paying dividends, and from operating activities, which cover the day-to-day business like revenues from customers. Therefore, capital expenditures and sales of long-term investments are the investing activities.

Cash flows from investing reflect how a company uses and generates cash through long-term assets and investments. It includes cash outflows for capital expenditures—buying property, plant, and equipment—and cash inflows from selling long-term assets or investments. This is distinct from financing activities, which involve borrowing, repaying debt, issuing or repurchasing stock, and paying dividends, and from operating activities, which cover the day-to-day business like revenues from customers. Therefore, capital expenditures and sales of long-term investments are the investing activities.