Final answer:
Investing activities typically involve cash spent, such as purchasing long-term assets or building new facilities, but can also involve cash collected, such as from the sale of assets. Firms finance these investments through methods like funding from investors, reinvesting profits, loans, or selling stock.
Step-by-step explanation:
Investing activities are vital for a firm as they often involve spending money to earn future profits. Three examples of investing activities include:
- Purchasing long-term assets such as machinery or equipment, which represents cash spent.
- Building a new plant or facility, again this is cash spent.
- Divesting an asset like selling a building or machinery, which would be cash collected.
Firms acquire the financial capital needed for these investments through various methods such as funding from early-stage investors, reinvesting profits, borrowing through banks or bonds, and selling stock. The nature of the investment can dictate the volume of cash inflow or outflow, impacting a firm's net cash from investing activities.