What constitutes a cash outflow in Investing Activities?

In the context of the statement of cash flows, investing activities generally encompass transactions that involve the acquisition and disposal of long-term assets, as well as investments in other companies. Cash outflows related to investing activities occur when a company spends cash to acquire these assets.

Purchases of land and buildings represent cash outflows because they involve significant capital expenditures made by the company to secure fixed assets that it will use over a long period. These transactions impact the cash flows of the business by reducing the cash available for other operations and investments.

Other options mentioned do not qualify as cash outflows in investing activities. Proceeds from equipment sales represent cash inflows, as they reflect money received from selling an asset. Cash dividends paid and interest and taxes paid are classified under financing and operating activities, respectively, not investing activities. Thus, purchases of land and buildings specifically illustrate a cash outflow within the investing activities section of the cash flow statement.