What is Investing Cash Flows?
Investing cash flows are the inflows and outflows tied to the acquisition and disposal of long-term assets and other investments not classified as cash equivalents, presented as the middle section of the IAS 7 cash flow statement.
How It Works
- Outflows: capital expenditure on property, plant, and equipment; acquisitions; purchases of investments.
- Inflows: proceeds from asset disposals, divestitures, dividends from associates.
- Interest and dividends received can sit in operating or investing per policy choice.
- Persistent negative investing cash flow with positive operating cash flow signals healthy reinvestment.
Saudi Context
Saudi industrial companies expanding under Vision 2030 typically show heavy negative investing cash flows tied to greenfield projects, often funded by Public Investment Fund participations or Saudi Industrial Development Fund loans. For SMEs, the bulk of investing outflows are software (ERP, e-invoicing) and vehicle or warehouse equipment purchases.
Example
A Saudi food manufacturer buys SAR 15,000,000 of new packaging machinery and sells an old van for SAR 80,000 during the year. Net investing cash flow = -15,000,000 + 80,000 = -SAR 14,920,000.