Business activities

Any business is a good source of income. It is organized efforts and activities of individuals to produce and sell goods and services for profit. The business should follow all the ethics along with the money-making activity. All businesses are involved in three types of activities i.e FINANCING ACTIVITIES, INVESTING ACTIVITIES, & OPERATING ACTIVITIES.   

 

  • FINANCING ACTIVITIES:
 It takes money to make money. The two primary sources of outside funds for corporations are borrowing money(debt financing) and issuing(selling) shares and stock in exchange for cash(equity financing). A company can take outa loan at a bank or borrow directly from investors by issuing debt securities called bonds. A company can also obtain funds by selling shares of stock to investors.
The stock investors are called stockholders whereas money lenders(who directly lends money) are called creditors. Creditors have the first right to claim money from a corporation other than stockholders.
  • INVESTING ACTIVITIES:
 Once the company has raised money or cash from financing activities, it uses that cash in investing activities. Investing activities involve the purchase of the resources a company needs to operate. A growing company purchases many resources, such as computers, delivery trucks, furniture, and buildings. Resources owned by a business are called assets. Different types of assets are given different names. For e.g fixed assets (furniture, plant & machinery), current assets (cash).
Investments are another example of investing activity.
  • OPERATING ACTIVITY:
 Once the business has the assets it needs to get started, it begins operations. The amount received on the sale of products or services is called Revenues. Revenues can be earned from different sources such as generating interest on debt securities held as investments. Sources of revenue common to many businesses are sales revenue, service revenue, and interest revenue.
Operating activities also include Expenses. In accounting language, expenses are the cost of assets consumed or services used in the process of generating revenues. Expenses take many forms and are identified by various names depending upon types of assets consumed or services used. For e.g the cost of goods sold, selling expenses, marketing expenses, administrative expenses, interest expenses, income taxes.
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