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Cash from investing activities

Cash from investing activities is one of the sections of the cash flow statement, more specifically the section right in the middle. The cash flow statement explains how much cash has come in and how much cash has gone out during a year, and what the sources and uses of this cash flow were. ⏱️TIMESTAMPS⏱️ 0:00 Introduction 0:23 Cash flow statement example 1:26 Cash from investing activities: CapEx 2:14 CapEx and Free Cash Flow 3:15 Cash from investing activities in BigTech 4:15 Cash provided by investing activities 5:02 Gain or loss on sale of businesses 5:38 Cash from investing activities definition Here's a high level cash flow statement example of one of the most-discussed companies in the world, more specifically a company that is likely to play a major role in the future of mobility. They started the year with $4.3 billion in cash, and ended the year with $6.8 billion in cash. A net increase of $2.5 billion. The cash flow statement explains where that increase came from, by providing a split into the operating, investing, and financing categories. These cash flow categories, as well as the details behind them, provide great insights into the expansion plans of the company, and its ability to generate significant cash flow from its operations. A net $2.4 billion was generated from operating activities (a net cash inflow), $1.4 billion was used in investing activities (a net cash outflow, hence the brackets to indicate a negative number), and $1.5 billion provided by financing activities (a net cash inflow). If you dive into the cash from investing activities section, you will find that the $1.4 billion is nearly all related to capital expenditures (purchases of property and equipment). That makes this “cash from investing activities” number very similar to the usual picture that we see for most companies in most years. Here are the cash from investing details for a large telecom company on the left: $17.6 billion total cash outflow in the category, with $17.9 billion of capital expenditures making up pretty much the full category. For this telecom company, the capital expenditures consist of tangible assets such as wireless networks and high-speed fiber, as well as intangible assets such as capitalized software. Most users of financial statements turn to the investing activities section of the cash flow statement for exactly that CapEx number, as this is an important input to calculate free cash flow. Free cash flow is usually defined as cash from operating activities, minus capital expenditures. Free Cash Flow is that part of the total cash flow that is not required for operations or reinvestment. If you turn to the cash flow statement of any of the Big Tech companies, you will find that a lot more tends to go on in the investing section. First of all, the size of the total cash used in investing activities can be enormous: $24.2 billion for this specific company in one single year. The purchases of property and equipment (cash outflows) and the proceeds from property and equipment sales and incentives received from property and equipment vendors (cash inflows) are the first two line items in this example. Payments to acquire businesses is the next line item. The last two line items are related to purchase and sale of marketable securities, the net cash outflow of $9.1 billion for these two combined represent the company’s decision to park part of the “excess cash” that is generated from operating activities into marketable securities on the balance sheet. The definition of the cash from investing activities section of the cash flow statement is: an overview of the cash used in, or provided by, the purchase or sale of fixed assets, businesses, and/or (marketable) securities. Philip de Vroe (The Finance Storyteller) aims to make accounting, finance and investing enjoyable and easier to understand. Learn the business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better investing decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In! Want to get access to bonus content, and/or express your gratitude by buying me a cup of tea? Join my channel as a member through    / @thefinancestoryteller