Module I· Cash Flow Statement ConstructionIntermediate
Question
Which items belong in investing cash flow?
Answer
Standard investing items:
- Capex — purchases of PP&E, typically the largest line.
- Proceeds from asset sales — sales of plant, real estate (against book value; the gain/loss runs through the income statement).
- M&A acquisitions — cash paid net of the target's acquired cash position.
- Divestitures — sales of business units / subsidiaries.
- Purchases / sales of securities (marketable securities, equity stakes).
- Loans made to / repaid by subsidiaries / joint ventures.
NOT investing
operating inventory purchases (that's OCF via Δ inventory) — a classic junior mistake.
Deep diveShow more details
Pitch tip
The investing section is the first indicator of growth investment — at industrials capex should be >= D&A for replacement; at tech companies capex can be much lower than D&A because of the low PP&E base.