Cash Flows From Investing Explained

The third major step in preparing the statement of cash flows is to compute and report cash flows from investing activities. We normally do this by identifying changes in

(1) all noncurrent asset accounts and
(2) the current accounts for both notes receivable and investments in securities (excluding trading securities).

We then analyze changes in these accounts to determine their effect, if any, on cash and report the cash flow effects in the investing activities section of the statement of cash flows.

Reporting of investing activities is identical under the direct method and indirect method.