Accounting Solver

UNDERSTANDING ACCOUNTING TALK 28 The Cash Flow Statement: Investing Activities

by ren on November 2nd, 2007

In the Cash Flow Statement, Investing Activities generally consist in acquisition of property or equipment, investment in stocks or bonds, placements in the money market, or time deposits.

An increase in Property & Equipment or Investments means that Cash has been converted from its readily available liquid form (i.e., on hand or in bank) to another asset. The Cash Flow from Investing Activities thus reflects a decrease in Cash.

A decrease in Property & Equipment or Investments means that additional cash for use in the business has been made available through sale of the property or encashment of the investment. The Cash Flow from Investing Activities thus reflects an increase in Cash.

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POSTED IN: Accounting for NonAccountants, Cash Flow Statements