Final answer:
Cash flows from investing activities on the statement of cash flows describe the cash transactions for investments in productive resources. These investments are typically in long-term assets aiming to earn future profits, financed in several ways including reinvesting profits.
Step-by-step explanation:
The cash flows from investing activities on the statement of cash flows reports the cash activity from the buying and selling of productive resources such as land, buildings, and equipment. This area of the cash flow statement deals with the inflow and outflow of cash used in investment in capital assets and investments that are not related to the day-to-day operations of a business. Firms often invest in long-term assets like new plants and equipment or engage in research and development projects expecting to earn profits in the future. They can raise financial capital to pay for these investments by various methods such as from early-stage investors, reinvesting profits, borrowing through banks or bonds, or selling stock. When companies reinvest their profits, they do so with the expectation that the reinvested cash flow will contribute to the company's growth and generate more sales and profits in future sales periods.