Should cash flows from investing activities include both the return of investment and the return on investment, namely interest and dividend revenue?

Cash flows from investing activities in the context of a company's cash flow statement include transactions that involve the purchase and sale of long-term assets and other investments not included in cash equivalents. These can encompass the purchase and sale of property, plant, and equipment; securities; and other assets.

However, the return of investment (such as proceeds from the sale of an asset) and the return on investment (e.g., interest and dividend income) are treated differently:

- Return of Investment: This refers to the cash flow resulting from the disposal or sale of an asset which is included in the investing activities. For example, if a company sells a piece of machinery, the cash received from this sale is considered an investing activity and would be included under cash flows from investing activities.

- Return on Investment (Interest and Dividend Income): Generally, these items are not included in the investing activities section of the cash flow statement. Instead, they are typically recorded as operating cash flows because they are considered to be part of the company's operations. The rationale is that interest and dividends are usually the result of the use of company's assets to generate revenue.

In summary, while the return of investment is indeed part of the cash flows from investing activities, the return on investment in the form of interest and dividend revenue is normally included in the operating activities section of the cash flow statement. This convention is followed under accounting standards such as the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP).