Final answer:
To determine if a company generates sufficient cash from operations to fund its investing activities, look at the company's cash flow statement and analyze the cash flow from operating activities.
Step-by-step explanation:
To determine if a company generates sufficient cash from operations to fund its investing activities, you can look at the company's cash flow statement. The cash flow statement shows the cash inflows and outflows from the company's operating, investing, and financing activities. Specifically, you can focus on the section of the cash flow statement that shows the cash flow from operating activities. If this amount is positive and sufficient to cover the company's investing activities, it indicates that the company is generating enough cash from operations.
For example, if a company generates $10 million in cash from its operations and its investing activities require $8 million, it shows that the company has sufficient cash flow from operations to fund its investing activities.
Additionally, you can also analyze the company's ratios like the operating cash flow ratio, which measures the company's ability to generate cash from operations. A higher ratio indicates a better ability to fund investing activities.