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CONCEPT
'Cash flow from investments' is a common item on a Balance Sheet and usually covers the purchase and sale of fixed assets, like real estate and heavy equipment. So, this line on the balance sheet generally consumes cash, instead of providing it, as the business grows. But not always.
A shift in market conditions, or a change in company policy, can provide the opportunity for raising money by selling fixed assets.
PRACTICAL APPLICATION
A manufacturer of lawn and garden supplies manufactured most of their own products. As they expanded their business, the cost of freight became a significant factor, so they subcontracted the manufacture of bulkier items to local companies close to their markets. This enabled them to sell to a wider market than they might otherwise have been able.
A recession hit the industry. Layoffs and short-time working became imminent, and the company faced the costs that such contraction would require.
They decided to sell their manufacturing plant and simply hire more subcontractors to take over the production. They were able to raise the cash they needed and continue to supply their customers.
Although this situation was dictated by market conditions, other situations could have caused the need to raise money by liquidating under-used assets.
See if there are any under-used assets in your company that can be liquidated.
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