What Is Cash Flow from Investing Activities?
By Markets & Investing DeskUpdated Nov 10, 2026
Definition
Cash flow from investing activities is the cash flow statement section showing net cash a company spent on, or received from, long-term assets, securities, acquisitions and loans to others.
Key takeaways
- CFI is one of three sections of the cash flow statement, alongside operating and financing activities.
- Purchases of long-term assets and investments are outflows. Sales, maturities and loan collections are inflows.
- Negative CFI is common for companies building capacity and does not by itself signal trouble.
- Classification depends on the nature of the transaction: the same asset category can land in different sections depending on why the company holds it.
Cash flow from investing activities (CFI) is the section of a company’s cash flow statement that reports the net cash a business spent on, or received from, long-term assets and investments during a period. It covers buying and selling property, plant and equipment (PP&E), purchasing and selling securities of other entities, acquiring or divesting businesses, and lending money to or collecting loans from others. A negative figure means the company put more cash into these assets than it took out. A positive figure means it brought in more from sales, maturities and collections than it spent.
Where CFI sits in the financial statements
A company reports three core statements. The balance sheet shows assets, liabilities and equity on a specific date. The income statement shows revenue and expenses over a period, measured on an accrual basis. The cash flow statement connects the two by showing how actual cash moved during the period, sorted into three buckets:
- Operating activities: cash from the company’s day-to-day business, such as collections from customers and payments for inventory, wages, suppliers and income taxes.
- Investing activities: cash spent on or received from long-term assets and investments.
- Financing activities: cash exchanged with the company’s owners and lenders, such as issuing or repurchasing stock, paying dividends, and borrowing or repaying debt.
The three sections add up to the net change in cash for the period, which reconciles beginning cash to ending cash on the balance sheet.
What goes in investing cash flows
The investing section tracks noncurrent assets, meaning assets expected to deliver value beyond the current year. The largest line for many companies is capital expenditures (CapEx), the cash paid for PP&E such as buildings, machinery and equipment.
| Activity | Effect on CFI |
|---|---|
| Purchase of PP&E (capital expenditures) | Outflow |
| Purchase of stocks, bonds or other securities of other entities | Outflow |
| Acquisition of another business (usually shown net of cash acquired) | Outflow |
| Loans made to other parties | Outflow |
| Sale of PP&E, such as a warehouse or equipment | Inflow |
| Sale or maturity of investment securities | Inflow |
| Collection of principal on loans made to others | Inflow |
| Insurance proceeds for damaged or destroyed long-term assets | Inflow |
Classification rules that cause confusion
Most errors come from transactions that resemble investing but belong elsewhere, or the reverse.
Inventory is operating, not investing. Inventory is bought to be sold in the normal course of business, so cash paid for it is an operating outflow even though it is an asset purchase.
Selling stock investments. When a company sells shares it holds in another entity, the proceeds are an investing inflow. Securities bought specifically for trading are the exception: under U.S. GAAP, cash flows from trading securities are classified by their nature and are generally operating. A company selling its own shares is a financing activity.
Loans depend on direction. Lending money to another party is investing; collecting that loan’s principal is investing too. Borrowing money and repaying it are financing. An “amount due from” a customer for goods or services is a trade receivable, part of operating activities, not an investing item.
Interest and dividends. Under U.S. GAAP, interest and dividends received are operating cash flows even when they come from investment holdings. IFRS (IAS 7) allows a company to classify them as either operating or investing, applied consistently. This affects comparisons between companies reporting under different standards.
Depreciation and gains are not investing cash. Depreciation, including the build-up of accumulated depreciation, is a noncash expense. Under the indirect method it is added back in the operating section. When a company sells an asset at a gain, the gain is subtracted in the operating section and the full cash proceeds appear in investing, so the cash is not counted twice.
Noncash investing and financing activities. Acquiring a building by issuing a note to the seller, or converting debt into equity, involves no cash. These transactions are excluded from the CFI total and disclosed separately in a supplemental schedule or note.
How to calculate cash flow from investing activities
The cash flow from investing activities formula is a simple sum of inflows minus outflows:
CFI = Proceeds from asset sales + Proceeds from sales and maturities of investments + Loan collections − Capital expenditures − Purchases of investments − Acquisitions − Loans made
Worked example (hypothetical)
Assume a manufacturer reports the following for a fiscal year:
- Capital expenditures: $30 million
- Purchases of marketable securities: $5 million
- Acquisition of a small competitor, net of cash acquired: $1 million
- Proceeds from selling marketable securities: $3 million
- Proceeds from selling an old warehouse: $2 million
CFI = $3M + $2M − $30M − $5M − $1M = −$34 million
If the warehouse had a book value of $1.5 million, the company records a $0.5 million gain on the income statement. That gain is removed from operating cash flow, while the full $2 million of proceeds stays in investing.
Estimating CapEx from the balance sheet
When you only have two balance sheets and an income statement, you can approximate capital expenditures:
CapEx ≈ Ending net PP&E − Beginning net PP&E + Depreciation expense
This assumes no significant asset sales, impairments, acquisitions or currency effects during the period. If any of those occurred, the estimate will be off, and the reported cash flow statement is the more reliable source.
Interpreting positive and negative CFI
A company with negative CFI is spending on its future: new plants, equipment, technology or acquisitions. That is a different signal from negative overall cash flow, where total cash falls because operations, financing and investing combined drained more than came in. A business with strong operating cash flow and heavy investing outflows can be healthy. One with weak operating cash flow funding the same outflows through new debt deserves a closer look at the financing section.
Positive CFI has several possible causes. A company may be selling divisions or real estate, shrinking its asset base, or simply letting a large portfolio of marketable securities mature and not reinvesting all of it. Cash-rich companies that park reserves in short-term securities can swing between positive and negative CFI from period to period as they roll those holdings, with little connection to their operating investment. Separating the CapEx and acquisition lines from the securities lines shows which story applies.
Why investors and analysts use it
CFI shows how management allocates capital for the long term. CapEx is a key input in valuation: free cash flow, commonly calculated as operating cash flow minus capital expenditures, estimates the cash left for debt repayment, dividends and buybacks. Comparing CapEx with depreciation over several years indicates whether a company is expanding its asset base or merely maintaining it. Earnings-based measures such as EBITDA leave capital spending out entirely, so the investing section fills a gap for capital-intensive businesses.
Tracking the acquisitions line also shows whether growth comes from internal investment or from buying other companies, which carries different integration and overpayment risks.
Limitations
- Lumpiness. A single large purchase or divestiture can dominate one period, so multi-year trends say more than any one quarter or year.
- No maintenance vs. growth split. Reported CapEx does not separate spending to sustain current operations from spending to expand, though management commentary sometimes does.
- Classification choices. Differences between U.S. GAAP and IFRS, and judgments about trading vs. investment securities, can make two similar companies look different.
- Noncash deals are excluded. Assets acquired with stock or debt do not appear in the CFI total, so the section can understate total investment.
- Cash, not value. CFI records what was paid, not whether the investment will earn a return.
For a complete view, read the investing section together with operating and financing cash flows, the balance sheet and the income statement for the same periods.
The Bottom Line
Investors and analysts use the investing section to see how management allocates capital and to calculate free cash flow. Negative CFI often reflects spending on future capacity, so judge it alongside operating and financing cash flows. Multi-year trends, the split between CapEx and securities lines, and noncash deals disclosed in the notes give a more reliable picture than any single period's total.
