What is investing cash flow?

Investing activities involve the acquisition and disposal of long-term assets and other investments that are not considered to be cash equivalents.  Investing cash flow (ICF) is cash flow arising from cash payments to acquire property, plant and equipment (PP&E) and other long-term assets, cash payments and cash receipts relating to the acquisition and disposal of debt and equity interests in other entities and in joint ventures (except for these relating to dealing or trading activity), and cash loans or advances made to other parties.

Investing in noncurrent assets is a use of cash, selling them is a source of cash.  Increases in PP&E, intangibles, investments and other noncurrent assets indicate that acquisition of these assets has taken place, while decreases indicate such assets have been sold or otherwise disposed of.

Cash flow from investing activities reflects the purchase and sale of property, plant and equipment, other noncurrent assets, including investments in other companies.  Although purchases decrease cash flow from investing activities, cash is invested in noncurrent assets with the expectation of higher future operating cash flows.

Investing cash flow measures the total cash generated or lost by the firm’s investments – items purchased with the purpose of generating future cash returns.