What Are Business Activities? (With Types of Activities)
By Indeed Editorial Team
Published May 14, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Companies that want to improve their overall activities can benefit from learning more about the various types of organizational activities. This requires consideration of the company's current operations and processes. By knowing more about organizational activities, you can improve both profits and sales. In this article, we discuss the definition of business activities, explore the types of business activities, learn tips for improving these activities, and answer several frequently asked questions.
What are business activities?
Business activities include any activities that involve business engagement with the aim of generating profits. This term involves all economic activities established by companies during their business. These activities include operations, along with investments and financial activities. You can also consider any activities that increase the company's value to shareholders to be one of these activities. Here are several components to consider about organizational activities:
Organizational activities refer to any events used by companies that help businesses create profits or income.
Organizations also use operating activities, which correlate to the business when it provides products to the market and has a significant impact on profitability. These activities include manufacturing, distributing, marketing, and sales.
Investment activities relate to the investment of money or cash, like the buying or selling of property and equipment, and losses and gains accrued from investments and financial activities.
Financial activities refer to the various sources of income from investors and banks, and the ways in which they use cash to pay stakeholders, like the payment of dividends and stock repurchases or loan payments.
Types of organizational activities
When companies generate income from operating, investing, and financing activities, they list these cash flows on their income statements and cash flow statements. Cashflow statements refer to cash flows that focus on the reconciliation of net income during an accrued cash flow. You can find the net income at the bottom of income statements, and the impact of changes to balance sheets occur following the identification of reconciliation back to cash flows.
You can add non-cash items that you previously removed from net income back into the cash flow, and you can deduce non-cash items that you previously added to the cash flow. Here's a list of the types of organizational activities:
Operating company activities
Operating business activities are activities within a company's cash flow statement, and these statements include information that provide professionals with information about expenses and cash flow related to company operations. These statements include particular cashless items, like the company's depreciation and amortization. These statements include changes in company balance sheet line items, along with accounts receivable and payable. Companies add or remove these elements depending on the income statement, but they don't result in changes in the cash moving in or out of companies.
When companies experience negative cash flows from operating activities, this suggests that the company receives a portion of its finances from investments and various financing activities. Nonprofit organizations typically don't have frequently negative cash flows. Companies that obtain cash flow from operating activities can review information about the balance sheet in the first section of the cash flow statement.
Investing company activities
The investing activities of companies appear in the second section of a company's cash flows. These refer to business activities that companies can capitalize from in a period of time spanning more than one year. Companies identify the purchase of long-term investments as uses of cash when describing their investing company activities. When companies review their cash flow statements for the line capital expenditures, this refers to investing activities found in the investing section of the cash flow statement.
When companies describe their investing activities, they refer to company activities for which organizations capitalize for more than one year, and for which they obtained losses or profits. Companies also list their real estate sales as a cash source on their cash flow statements. This is because many companies consider real estate investment, and they list this activity as a capital expenditure.
Financing company activities
The financing activities within companies appear on the final section of the cash flow section. These activities include the company's primary and secondary public offerings, along with their debt financing. This section considers the amount of money obtained from company dividends and interest. This also includes any company activities that provide the company income from fundraising or external financing.
Tips for improving company activities
Here's a list of tips for those who want to improve their business activities:
Establish company goals
If you want to improve company activities, you benefit from setting financial goals and objectives. From here, you can establish ongoing planning tools and methods to help you accomplish those goals. For example, if you want to increase profits by a particular percentage, you can focus on increasing traffic to the website. This increases the number of consumers that visit the website and also increases the likelihood of generating profits. To establish company goals, it's beneficial to communicate and collaborate with other professionals.
This provides you with the opportunity to listen to various viewpoints and opinions about the company, along with the goals of each department. You may find it beneficial to ask department leaders for a collective meeting, which allows you to hear all viewpoints simultaneously.
You can improve company activities by remaining updated with company financials and activities. For example, you can communicate with the professionals responsible for company investments. When you have consistent knowledge of company financials, you can help other professionals make decisions about investments and activities because you're informed of the company's budgets and cash flow.
If you want to improve company activities, you may want to develop more diversity in the company's activities. It's beneficial to consider a range of operating activities, financial activities, and investment activities. For example, you can maintain a strong rate of investments in the company portfolio, along with strategies that lower operating costs and increase the impact of profits. This is because you can experience fewer risks and losses when diversifying financial activities and investments. If you experience large losses with a particular investment, you can also experience large gains with another investment.
This prevents companies from losing a significant amount of money. It's also beneficial to consider the risk involved in various investments and company activities.
You can monitor industry trends to develop more information about activities that can have a positive impact on company financials. To do this, you can research competing companies, take courses, and attend networking events. Obtaining more information about competing business' activities and how those activities impact the market can help you improve your own strategies.
Frequently asked questions about organizational activities
Here's a list of answers to FAQs about organizational activities:
What's the difference between a primary and secondary business activity?
Primary company activities refer to activities that generate more than half of the company's revenue. When a company has more than one business activity, the primary activity refers to the one with the largest gross receipts. A secondary business activity differs from this because it involves the company's manufacturing processes.
How is the cash flow statement linked to company activities?
The cash flow statement refers to various company activities because they involve activities like operations, along with investments and external financing. Companies use the information collected on their financial statements to identify the reconciliation of company net income, and the accrual basis and cash flow.
You can identify the net income in the lower sections of the company's income statement. When required, you can review the changes of the balance sheet's cash impact to identify and reconcile both the actual cash inflows and outflows. You can deduct cashless items that you previously removed or added to the company's net income. Following this, you obtain a report that provides potential investors with a summary of company activities, and how the company's profits and cash impact the company.
Who works with company activities?
Accountants typically work with the calculations involved in company activities and their impact on company financials. These professionals work with company income statements, along with their cash flow statements. They also prepare accounts and tax returns. When required, they monitor company budgets and activities to determine whether the company respects those budgets. Accountants forecast company financials and compile reports about company activities and financials. The national average salary for accountants is $54,140 per year.
Salary figures reflect data listed on Indeed Salaries at time of writing. Salaries may vary depending on the hiring organization and a candidate's experience, academic background, and location.
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