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Recommended textbook solutionsPrinciples of Economics7th EditionN. Gregory Mankiw 1,263 solutions Economics: Principles in Action1st EditionArthur O'Sullivan, Steven M. Sheffrin 831 solutions Economics1st EditionGrant Wiggins 890 solutions Principles of Corporate Finance12th EditionFranklin Allen, Richard A. Brealey, Stewart C. Myers 600 solutions What Are Business Activities?Business activities include any activity a business engages in for the primary purpose of making a profit. This is a general term that encompasses all the economic activities carried out by a company during the course of business. Business activities, including operating, investing, and financing activities, are ongoing and focused on creating value for shareholders. Key Takeaways
Business ActivitiesUnderstanding Business ActivitiesThere are three main types of business activities: operating, investing, and financing. The cash flows used and created by each of these activities are listed in the cash flow statement. The cash flow statement is meant to be a reconciliation of net income on an accrual basis to cash flow. Net income is taken from the bottom of the income statement, and the cash impact of balance sheet changes are identified to reconcile back to actual cash inflows and outflows. Non-cash items previously deducted from net income are added back to determine cash flow; non-cash items previously added to net income are deducted to determine cash flows. The result is a report that gives the investor a summary of business activities within the company on a cash basis, segregated by the specific types of activity. Operating Business ActivitiesThe first section of the cash flow statement is cash flow from operating activities. These activities include many items from the income statement and the current portion of the balance sheet. The cash flow statement adds back certain non-cash items such as depreciation and amortization. Then changes in balance sheet line items, such as accounts receivable and accounts payable, are either added or subtracted based on their previous impact on net income. These line items impact the net income on the income statement but do not result in a movement of cash in or out of the company. If cash flows from operating business activities are negative, it means the company must be financing its operating activities through either investing activities or financing activities. Routinely negative operating cash flow is not common outside of nonprofits. Investing Business ActivitiesInvesting activities are in the second section of the statement of cash flows. These are business activities that are capitalized over more than one year. The purchase of long-term assets is recorded as a use of cash in this section. Likewise, the sale of real estate is shown as a source of cash. The line item "capital expenditures" is considered an investing activity and can be found in this section of the cash flow statement. Financing Business ActivitiesThe cash flow statement's final section includes financing activities. These include initial public offerings, secondary offerings, and debt financing. The section also lists the amount of cash being paid out for dividends, share repurchases, and interest. Any business activity related to financing and fundraising efforts is included in this section of the cash flow statement. How Is the Cash Flow Statement Linked to Business Activities?The cash flows used and created by each of the three main classifications of business activities—operating, investing, and financing—are listed in the cash flow statement. This financial statement is meant to be a reconciliation of net income on an accrual basis to cash flow. Net income is taken from the bottom of the income statement, and the cash impact of balance sheet changes are identified to reconcile back to actual cash inflows and outflows. Non-cash items previously deducted from or added to net income are added or deducted respectively to determine cash flows. The result is a report that gives the investor a summary of business activities within the company on a cash basis, segregated by the specific types of activity. What Are Operating Business Activities?Cash flow from operating business activities, usually the first section of the cash flow statement, includes many items from the income statement and the current portion of the balance sheet. The cash flow statement adds back certain non-cash items such as depreciation and amortization. Then changes in balance sheet line items, such as accounts receivable and accounts payable, are either added or subtracted based on their previous impact on net income. These line items impact the net income on the income statement but do not result in a movement of cash in or out of the company. Routinely negative operating cash flow is not common outside of nonprofits. What Are Investing Business Activities?Investing business activities are those that are capitalized over more than one year and usually appear as the second section of the cash flow statement. The purchase of long-term assets is recorded as a use of cash in this section. Likewise, the sale of real estate is shown as a source of cash. The line item "capital expenditures" is considered an investing activity and can be found in this section of the cash flow statement. What Are Financing Business Activities?The cash flow statement's final section includes financing business activities. These include initial public offerings, secondary offerings, and debt financing. The section also lists the amount of cash being paid out for dividends, share repurchases, and interest. Any business activity related to financing and fundraising efforts is included in this section of the cash flow statement. What is an activity that seeks profit by providing goods or services to others?profit. any commercial activity that seeks profit by providing good and services in exchange for money. the money left over after a business has paid the cost of providing its goods and services.
What is an activity that seeks profit?business. Business is any commercial activity that seeks profit providing goods and services to others in exchange for money.
What is an organization that provides goods and services while seeking to operate at a profit?A business is an organization that strives for a profit by providing goods and services desired by its customers. Businesses meet the needs of consumers by providing medical care, autos, and countless other goods and services.
What is the total amount of money a business takes in during a given period by selling goods and services called?Revenue is the money generated from normal business operations, calculated as the average sales price times the number of units sold. It is the top line (or gross income) figure from which costs are subtracted to determine net income. Revenue is also known as sales on the income statement.
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