Investment cash flow, also known as investment cash flow, is a financial indicator that allows evaluating the cash movements related to the investment activities of a company during a specific period. In simple terms, it represents the cash flows generated by the organization’s long-term investments, such as the acquisition or sale of fixed assets, investments in expansion projects, and any other significant investment activity.
This indicator is crucial to understanding how a company is using its capital to invest in its long-term growth and development. Investment cash flow provides a comprehensive view of the company’s investments and their ability to generate future returns.
How to calculate investment cash flow?
Calculating investing cash flow involves subtracting the cash flows related to a company’s investing activities. Below is a basic formula to calculate investment cash flow:
Investment Cash Flow = Cash inflows from investing activities – Cash outflows from investing activities
Cash inflows from investing activities include income generated from the sale of assets, repayments of loans to third parties, and any other positive cash flows related to investments. On the other hand, cash outflows from investing activities include expenses on the acquisition of assets, investments in projects and any other negative cash flows related to investments.
Importantly, investment cash flow is calculated over a specific period, usually annually or quarterly, to have an accurate view of the company’s investing activities during that period.