Understanding why a company has a negative cash flow from investing activities can be a challenge. It could be a warning sign that the company's management is not efficiently using its assets to generate revenue. But it might also b💃e a positive sign that management is positioning the company for future growth.

You can tell which it is by taking a close look at the company's cash flow statement.

The Cash Flow Statement

澳洲幸运5开奖号码历史查询:Cash flow from investing activities is one of the three sections that make up a company's statement of cash flows. This part of its financial report summarizes the amount of 澳洲幸运5开奖号码历史查询:cash and cash equivalents (CCE) entering and leaving a company during a stated perioꦛd. 

The cash flow statement complements the 澳洲幸运5开奖号码历史查询:balance sheet and 澳洲幸运5开奖号码历史查询:income statement.

澳洲幸运5开奖号码历史查询:The cash flow statement (CFS) reports how the company uses the money it takes in from its operations. The main components of🌳 the cashඣ flow statement are:

• Cash from operating activities
• Cash from investing activities
• Cash from financing activities

Cash From Investing Activities

The investing activities section includes any outflows of cash or sources of cash from a company's investments. A purchase or sale of an asset, cash out due to a 澳洲幸运5开奖号码历史查询:merger or acquisition, loans made, or loanꦛ proceeds received 💯are all included. 

In short, any changes in assets, investments, or equipment will be accounted for in investing activities. When a company 澳洲幸运5开奖号码历史查询:divests an asset, the transaction is 🅘considered a credit or "cash in" and is listed in investing activities.

Interpreting Negative Cash Flow

Companies and investors naturally like to see positive cash flow from all of a company's operations, but having negative cash flow from investing activities is not always bad. To make an evaluation of a company's investing activities, investors need to review the company's particular situation in greater detail.

It's not uncommon for a growing company to have a negative cash flow from investing activities. For example, if a growing company decides to invest in long-term 澳洲幸运5开奖号码历史查询:fixed assets, it will appear as a decrease in cash within🙈 that company's cash flow from investing✨ activities.

Even well-established companies make investments in 澳洲幸运5开奖号码历史查询:long-term assets such as property and equi🦋pment from time to time. This ✅might cause investing activities to go negative for the period. 

Real World Example of Negative Ca🌠sh Flow Investments

For example, below is the from Exxon Mobil (XOM). Here are some important points to consider:

• We can see that net cash used in investing activities was -$1.859 billion for the period (highlighted in green).
• The two primary drivers for the negative investing activities number were the purchase of 澳洲幸运5开奖号码历史查询:property, plant, and equipment (PP&E) for $3.349 billion and the sale of assets crediting cash for $1.441 billion.
• However, cash from 澳洲幸运5开奖号码历史查询:operating activities (in blue) totaled $8.519 billion and is more than enough cash to pay for the investment in fixed assets.

What the Numbers Mean

In this example, an investor might be concerned about negative cash flow in investing activities to 𒈔the tune of $1.8 billion.

However, when we delve into the numbers, we can see it's a positive sign. Exxon Mobil is an 澳洲幸运5开奖号码历史查询:oil and gas producer. It needs to update its equipment like drilling rigs, and it needs to purchase equipment periodically. As a result, the negative cash flow from investing means the company is invest💞ing in its future growth.

If a company has a negative cash flow from investing activities because it has made poor decisions, the negative🦩 cash flow from investing activities might be a war💜ning sign. 

The Bottom Line

It's important to analyze the entire cash flow statement and all its components to determine if the negative cash flow is a positive or negative sign.

The most effective way to evaluate a negative cash flow situation is to calculate a company's 澳洲幸运5开奖号码历史查询:free cash flow. Free cash flow is the money the company has left after paying for 澳洲幸运5开奖号码历史查询:capital expenditures (CapEx) and operating expenses.

This is an important metric for investors because it shows how effective a company's management is at generating cash.