Cash flows from Investing and Financing Activities

Introduction to Cash flows from investing activities

This section of the statement is regarding with cash payments made to obtain additional non-current assets and along with cash receipts from the disposal of non-current assets. These non-current assets will be apt to be the usual items like machinery and buildings. They may also be loans made through the business or shares in other company bought through the business.

This section also involves cash receipts taking place from financial investments (loans and equities) made outside the business. These receipts are interest on loans that made through the business and dividends from shares in other companies that are owned through the business.

Cash flows from financing activities

This part of the statement is referred with the long-term financing of the business.

Therefore here we are considering borrowings (other than very short-term borrowings) and finance from share issues. This type is concerned along with repayment/redemption of finance and with the raising of it. It is permissible within IAS 7 to involve dividend payments made through the business here, like an alternative to including them in 'Cash flows from operating activities' (above).

Net increase or decrease in cash and cash equivalents

The total of the statement must, of course, be the net increase or decrease in cash and cash equivalents over the period concerned.

The influence on a business's cash and cash equivalents of its various activities is shown in Figure. As described, the arrows depict the normal direction of cash flow for the typical healthy, profitable business in a typical year.

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Diagram: Diagrammatical representation of the statement of cash flows

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