Introduction:
The operating activities are considered as the company’s source of income which generates revenue on a regular basis. It highly focuses on the company’s core competencies and associations with their business activities. Furthermore, it evolves around various departments of the organization such as, manufacturing, distributing, selling, marketing and the finance section accordingly. These activities/services can help in maintaining the company’s cash flow statement as well as evaluating if the company is doing lucrative business in the markets or not.
The operating activities are derived from the ‘cash-flow statement’ of the company along with investing and financing activities that work together to bring about the revenue in any organization. It would be appropriate to state that operating activities are labelled as the ‘backbone’ of any corporation, since it hands out the functionality of the business into the markets.
Example:
Assume that a new apparel store has opened in the town, its operating activities will be based upon ‘the buying material’ as well as ‘paying the staff’ for producing trendy clothes. Furthermore, the administration would consider the expense behind taking the material to the factories and then to the warehouses. Later on, the same clothes would be sent to the customers through logistic services in the city. This scenario best describes the operating activities of a business setup, as it includes its core competencies of running the whole setup.
Additional Information:
To get a clearer picture of how operating activities are associated with the cash flow statement, the experts reckon adding depreciation expenses, total losses, decrease in current assets and addition in current liabilities to the net income. Moreover, subtracting the profits, increase in current assets and a noticeable decrease in current liabilities to get to an accurate answer.