Capital expenditures are key indicators of capital efficiency which affect margins (i.e., profit on product). Capital expenditures can indicate a company's commitment to future growth or expansion. An analyst or investor needs to understand what a negative or positive capex amount means.
It is important to understand that negative numbers on the cash flow statement indicate money leaving the firm (capital expenditures). In the case of capital expenditures, if there is a significant amount of money leaving the company, this could indicate that the company has invested in long term assets. A major upgrade in technology or an aggressive expansion plan could indicate a major project or expansion. In spite of being negative on the cash flow statement as a capital outlay, investment activities can indicate a firm's potential for growth in the future.
If investing cash flow balances are positive on the cash flow statement, which indicates inflows, this could indicate the firm has sold investment or capital assets (divestments) that have not yet been replaced with new assets. When divestitures impede the growth or maintenance of the company's business operations, such divestitures might not be good signs for the company in the long run. Investors need to analyze and interpret what the data says about what is happening within the company and how managers are utilizing capital.