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International Business Machines Corp (NYSE:IBM)
Cash Flow from Investing
$-3,001 Mil (TTM As of Dec. 2014)

Cash Flow from Investing covers the cash a company gains or spends from investment activities in financial market and operating subsidiaries. It also includes the cash the company used for property, plant and equipment (PPE).

For the three months ended in Dec. 2014, International Business Machines Corp spent $947 Mil on purchasing property, plant, equipment. It gained $79 Mil from selling property, plant, and equipment. It spent $6 Mil on purchasing business. It gained $1,868 Mil from selling business. It spent $825 Mil on purchasing investments. It gained $728 Mil from selling investments. It paid $107 Mil for net Intangibles purchase and sale. It paid $0 Mil for discontinued investing activities. And it paid $2,026 Mil for other investing activities. In all, International Business Machines Corp spent $1,236 Mil on investment activities in financial market and operating subsidiaries for the three months ended in Dec. 2014.


Definition

Cash Flow from Investing covers the cash a company gains or spends from investment activities in financial market and operating subsidiaries. It also includes the cash the company used for property, plant and equipment (PPE).

If a company spends cash on property, plant and equipment (PPE), this will reduce their cash position. This is called Capital Expenditures (CPEX).

Likewise, if a company buys another company for cash, this will reduce their cash position.

International Business Machines Corp's Cash Flow from Investing for the fiscal year that ended in Dec. 2014 is calculated as:

International Business Machines Corp's Cash Flow from Investing for the quarter that ended in Dec. 2014 is calculated as:

International Business Machines Corp Cash Flow from Investing for the trailing twelve months (TTM) ended in Dec. 2014 was 35 (Mar. 2014 ) + -1000 (Jun. 2014 ) + -800 (Sep. 2014 ) + -1236 (Dec. 2014 ) = $-3,001 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Explanation

Cash flow from investing contains nine items:

1. Purchase Of Property, Plant, Equipment:
Purchase of PPE indicates the amount used to purchase property, plant, and equipment.

International Business Machines Corp's purchase of property, plant, equipment for the three months ended in Dec. 2014 was $-947 Mil. It means International Business Machines Corp spent $947 Mil on purchasing property, plant, equipment.

In the capital spending for property, plant and equipment (PPE), some part of spending may be from the expansion of business. The business needs more property, plant and equipment (PPE) as it grows. Another part may be from replacement of the property, plant and equipment (PPE) of existing business. For some companies, the cash spent on replacing of the property, plant and equipment (PPE) of the existing business will be close to the depreciation of property, plant and equipment (PPE) reported in the income statement.

In Warren Buffett’s definition of “Owner’s Earnings”, he deducts the estimate of the cost of replacing the property, plant and equipment (PPE) of the existing business from cash flow from operations. The cash spent on the new property, plant, and equipment is not deducted. The reason is because these are not costs of the existing business. In his 1986 letter to shareholders, Warren Buffett wrote this about owner earnings:

"These represent (a) reported earnings plus (b) depreciation, depletion, amortization, and certain other non-cash charges...less (c) the average annual amount of capitalized expenditures for plant and equipment, etc. that the business requires to fully maintain its long-term competitive position and its unit volume....Our owner-earnings equation does not yield the deceptively precise figures provided by GAAP, since (c) must be a guess - and one sometimes very difficult to make. Despite this problem, we consider the owner earnings figure, not the GAAP figure, to be the relevant item for valuation purposes...All of this points up the absurdity of the 'cash flow' numbers that are often set forth in Wall Street reports. These numbers routinely include (a) plus (b) - but do not subtract (c)."

2. Sale Of Property, Plant, Equipment:
Sale of PPE indicates the amount gained from selling property, plant, and equipment.

International Business Machines Corp's sale of property, plant, equipment for the three months ended in Dec. 2014 was $79 Mil. It means International Business Machines Corp gained $79 Mil from selling property, plant, and equipment.

3. Purchase Of Business:
Purchase of business indicates the amount used to purchase business.

International Business Machines Corp's purchase of business for the three months ended in Dec. 2014 was $-6 Mil. It means International Business Machines Corp spent $6 Mil on purchasing business.

4. Sale Of Business:
Sale of business indicates the amount gained from selling business.

International Business Machines Corp's sale of business for the three months ended in Dec. 2014 was $1,868 Mil. It means International Business Machines Corp gained $1,868 Mil from selling business.

5. Purchase Of Investment:
Purchase of Investments represents cash outflow on the purchase of investments in securities.

International Business Machines Corp's purchase of investment for the three months ended in Dec. 2014 was $-825 Mil. It means International Business Machines Corp spent $825 Mil on purchasing investments.

6. Sale Of Investment:
Sale of Investments represents cash inflow on the sale of investments in securities.

International Business Machines Corp's sale of investment for the three months ended in Dec. 2014 was $728 Mil. It means International Business Machines Corp gained $728 Mil from selling investments.

7. Net Intangibles Purchase And Sale:
Net Intangibles purchase and sale means the net cash inflow received by a company that comes from the purchase and sale of intangibles. It equals the cash received from sale of intangibles minus the cash spent on purchasing intangibles.

International Business Machines Corp's net Intangibles purchase and sale for the three months ended in Dec. 2014 was $-107 Mil. It means International Business Machines Corp paid $107 Mil for net Intangibles purchase and sale.

8. Cash From Discontinued Investing Activities:
Cash from discontinued investing activities means the cash received by a company that comes from the discontinued investing activities.

International Business Machines Corp's cash from discontinued investing activities for the three months ended in Dec. 2014 was $0 Mil. It means International Business Machines Corp paid $0 Mil for discontinued investing activities.

9. Cash From Other Investing Activities:
Cash from other investing activities means the cash received by a company that comes from other investing activities.

International Business Machines Corp's cash from other investing activities for the three months ended in Dec. 2014 was $-2,026 Mil. It means International Business Machines Corp paid $2,026 Mil for other investing activities.


Related Terms

Cash Flow from Operations, Cash Flow from Financing, Cash Flow for Capital Expenditures, Purchase of PPE, Sale of PPE, Purchase of Business, Sale of Business, Purchase of Investment, Sale of Investment, Net Intangibles Purchase And Sale, Cash From Discontinued Investing, Cash From Other Investing


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

International Business Machines Corp Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
PurchaseOfPPE -4,634-5,166-4,630-4,171-3,447-4,185-4,108-4,082-3,623-3,740
SaleOfPPE 1,107430537350330770608410372404
PurchaseOfBusiness 00-1,009-6,313-1,194-5,922-1,811-3,722-3,056-656
SaleOfBusiness 003107140055145992972,357
PurchaseOfInvestment -4,526-28,555-24,117-4,590-5,604-6,129-1,594-4,109-4,608-2,338
SaleOfInvestment 4,18025,54224,9846,1003,5997,8773,3453,1424,8732,493
NetIntangiblesPurchaseAndSale 00000-569-559-635-517-443
CashFromDiscontinuedInvestingActivities 0000000000
CashFromOtherInvestingActivities -550-3,800-750-732-813-404-291-607-1,064-1,078
Cash Flow from Investing -4,423-11,549-4,675-9,285-6,729-8,507-4,396-9,004-7,326-3,001

International Business Machines Corp Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
PurchaseOfPPE -947-1,000-714-860-985-1,064-849-908-1,036-947
SaleOfPPE 5817712358751167410914279
PurchaseOfBusiness -341-1,456-58-121-2,383-494-264-339-47-6
SaleOfBusiness 574121022355039117811,868
PurchaseOfInvestment -941-1,513-2,136-999-583-890-477-359-677-825
SaleOfInvestment 7241,1711,1691,5901,276838608634523728
NetIntangiblesPurchaseAndSale -156-159-139-136-131-111-112-110-114-107
CashFromDiscontinuedInvestingActivities 0000000000
CashFromOtherInvestingActivities 31-1,324732-397-51-1,348664-44328-2,026
Cash Flow from Investing -998-4,092-1,013-863-2,547-2,90335-1,000-800-1,236
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