Final answer:
The sale of real estate held as a long-term investment increases cash under the investing activities section of the statement of cash flows, reflecting a capital gain or loss depending on the sale price relative to its book value. Such sales impact liquidity and rate of return, critical for companies with many shareholders to monitor for financial health.
Step-by-step explanation:
The sale of real estate held as a long-term investment impacts the statement of cash flows by providing a source of cash under the investing activities section. When a company sells such an asset, it generally results in a cash inflow which reflects the amount of money the company obtained from the sale.
The exact impact on the statement of cash flows would depend on the price at which the property was sold compared to its recorded book value. If the property is sold for more than its book value, it results in a capital gain; if sold for less, a capital loss is incurred.
It's also important to note that while real estate investment can offer moderate rate of return and nonfinancial benefits such as housing, it is characterized by low liquidity due to the time and effort required to sell and realize cash from the investment.
For any entity with a large number of shareholders, the timing and amounts of cash flows from such sales are critical for evaluating the liquidity and investment performance of the company.