What is the relation between cash flow from investment activity and the return to assets ratio

Return on Assets = Net Income/Total Assets.

Cash Flow From Investment Activities = Cash changes resulting from1) gains and losses on investments2) Sale or purchase of assets

Therefore, ROA gets affected from Cash Flow from investment activities in2 ways:

1) Numerator: Net Income changes if the firm makes a gain or a loss on any investments

2) Denominator: Total Assets change if the firm buys or disposes of any assets

I endorse MR  MUHAMMAD FAHAD answer 

cash flow in investment activity

It is the cash flows that include the sale and purchase of long-term assets, and requires analysis of the elements identified in the budget along with the assets that have not been analyzed when determining cash flows from operating activities 

Example

*-Cash receipts from the sale of fixed assets or investments.

Return on Assets ratio = Net Income/Total Assets.

*- If the cash flow of  investment  activities is " in " ,  This means  sale of fixed assets and therefore higher income and increase the percentage rate of return on asset

*- If the cash flow of  investment  activities is " out"  means buying assets, leading to a lower  of return on  assets ratio

 thanks

Cash generated from investment activities can be in the form of rental income which may not be in line with the main business. However Return on assets ratio is concerned with income generated by using assets purchased for business purpose 

good answer by Muhammad Fahad Chughtai

agreed with FAHAD answer

If you will just focus on the words Cashflows from an investiment and Return on Assets you will come to know that both are focusing on Income and Assets.

cash flow contain three parts 1- operation 2- finance 3- investment

assets apart of investment   

roi = net income / net assets

Both are directly proportional to each other. If one affected the other will also affect both the aspects.

Agreed with  the  Answer  given  by  Mr. Fahad.  Cash  flow  could  be  due  to  Sale or Purchase  transactions & 

I endorse answer by Muhammad Fahad Chughtai

ROA gets affected from Cash Flow from investment activities in2 ways:

1) Numerator: Net Income changes if the firm makes a gain or a loss on any investments

2) Denominator: Total Assets change if the firm buys or disposes of any assets

Cash flow from investing activities includes inflow like proceeds from sale of asset, dividend received from investment in equity shares etc and outflow like investment in fixed assets and investment in equity and debentures.

Return on asset means profit made from the resources invested.

ROA = Net Income

.          Average total assets