What Are The 4 Types Of Business Activities – Business activities include all activities that a business engages in for the primary purpose of making a profit. This is a general term that includes all the economic activities that a company carries out during its business. Business activities, including operating, investing and financing activities, are ongoing and focused on creating value for shareholders.
There are three main types of business activities: operating, investing and financing. The cash flows used and generated by each of these activities are listed in the cash flow statement. The cash flow statement is intended to be a reconciliation of net income on an accrual basis with cash flow. Net income is taken from the bottom of the income statement, and the cash impact of changes in the balance sheet are identified to be reconciled with actual cash inflows and outflows.
What Are The 4 Types Of Business Activities
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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 in the company on a cash basis, separated by the specific types of activities.
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The 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 the balance sheet items, such as accounts receivable and accounts payable, are added or subtracted based on their previous impact on net income.
These line items affect the net income on the income statement, but do not lead to a movement of cash in or out of the business. If cash flows from operating business activities are negative, this means that the company must finance its business activities through investing activities or financing activities. Routine negative operating cash flow is not common outside of nonprofits.
Investing 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 in this section as a use of cash. Similarly, the sale of real estate is shown as a source of money. The line item “Capital expenditures” is considered an investment activity and can be found in this section of the cash flow statement.
The last section of the cash flow statement includes financing activities. These include initial public offerings, secondary offerings and debt financing. This section also lists the amount of money paid for dividends, share buybacks and interest. Any business activity related to financing and fundraising efforts is included in this section of the cash flow statement.
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The cash flows used and generated by each of the three major classifications of business activities—operating, investing, and financing—are listed in the cash flow statement. This financial statement is intended to be a reconciliation of net income on an accrual basis with cash flow.
Net income is taken from the bottom of the income statement, and the cash impact of changes in the balance sheet are identified to be reconciled with 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 in the company on a cash basis, separated by the specific types of 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 section of the balance sheet. The cash flow statement adds back certain non-cash items, such as depreciation and amortization. Then, changes in the balance sheet items, such as accounts receivable and accounts payable, are added or subtracted based on their previous impact on net income. These line items affect the net income on the income statement, but do not lead to a movement of cash in or out of the business. Routine negative operating cash flow is not common outside of nonprofits.
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 in this section as a use of cash. Similarly, the sale of real estate is shown as a source of money. The line item “Capital expenditures” is considered an investment activity and can be found in this section of the cash flow statement.
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The last section of the cash flow statement covers financing of business activities. These include initial public offerings, secondary offerings and debt financing. This section also lists the amount of money paid for dividends, share buybacks and interest. Any business activity related to financing and fundraising efforts is included in this section of the cash flow statement. Lesson 2.1 2/4/2019 Lesson 2.1 Business Activities Identify the three types of business Describe the six business activities Intro to Business
3 2.1 Producers Producers are companies that make products that are used by individuals and other companies. If they take resources from nature to make their products or for direct consumption, they are referred to as extractors. A large group of producers are manufacturers, companies that receive supplies from other producers and convert them into their own products.
4 2.1 Intermediaries Intermediaries are companies involved in selling goods and services from producers to consumers and other companies. The most common types of intermediaries are retailers and wholesalers. A retailer sells products directly to consumers at a business location. A wholesaler is an intermediary company that sells the products of a manufacturer or extractor to a retailer. Some intermediaries help distribute and sell products and services.
2.1 Service companies Instead of offering products for sale, a service company carries out activities that are consumed by customers. Both businesses and consumers use service companies. Examples of Service Companies Accountants Agriculture Painters Painting Babysitters Lawyers Pet Sitters Dentists and Doctors Online Travel Agents Web Designers
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2.1 Business activities Generate ideas Improve or offer something new As good or better than the competition Raising capital resources to operate a business is critical Financial resources are needed to buy: buildings and equipment Hire and train employees Daily operations
2.1 Business Activities Buying goods and services Operating a business includes inventory of goods Expenses and equipment Hiring and training staff Main resource: people Most companies have a human resources department to hire, train and recruit
2.1 Business Activities Market goods and services Without proper marketing, even the best products and services may not be known and therefore not purchased by consumers Keep business records Computer technology to analyze financial data. Businesses fail
Lesson 2.2 2/4/2019 Lesson 2.2 Business Ownership Describe the nine forms of business ownership Identify five business management activities Intro to Business
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2.2 Forms of business ownership Joint forms Sole proprietorship Partnership Corporation Other forms Franchises Cooperatives Nonprofit Corporations Joint Ventures Corporations Limited Liability Company
2.2 Joint forms of business A business that is owned and operated by only one person is called a sole proprietorship. A business that is owned and operated by a small group – often no more than two or three people – who have entered into an agreement is called a partnership. A business owned by a number of people and operated under the written permission of the state that charters it is called a corporation.
13 2.2 Franchise A franchise is a written contract that gives permission to a business person to sell someone else’s product or service.
14 2.2 Cooperatives A company that is owned by the members it serves and works in their interests is called a cooperative. In a consumer cooperative, consumers buy goods and services together at lower prices than each person could buy individually. A cooperative of producers, usually a farm organization, gives the producers more bargaining power when selling their products and allows them to be more competitive in the market.
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2.2 Nonprofit Corporations Corporations created for social, political, charitable, educational or general welfare purposes are known as nonprofit corporations.
16 2.2 Joint Ventures An agreement between two or more companies to share a business project is known as a joint venture.
17 2.2 S Corporations The S corporation gets its name from a section of the Internal Revenue Service code. Many small businesses favor this type of corporation. One advantage of the S Corporation is the elimination of double taxation.
2.2 Limited liability company A limited liability company (LLC) combines the best features of a corporation and a partnership. It provides liability protection for the owners, but does not require a complex set of organizational and operating requirements such as those required for a corporation.
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20 2.2 Plan The process of thinking, gathering and analyzing information, as well as making decisions about all phases of the business, is called planning.
21 2.2 Organizing The process of determining what work needs to be done and who needs to do it is called organizing.
22 2.2 Personnel Personnel Includes the many activities involved in finding, selecting, hiring, training, evaluating and rewarding employees.
23 2.2 Lead direction
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