Types of Business Activities

Commerce is nothing but the distribution of goods and services produced by the industry.

It also refers to the buying and selling trading of products/services, usually on a large scale. Commerce includes that of both items – money must change hands when goods or services are traded. It’s all about trade between entities.

Forms of Commerce

• Sole Proprietorship

Sole proprietorships are a business form of one person running all the functions. This individual is usually the owner of the company. In other words, only one person runs the fair running and management of the firm. Sole proprietorships have high chances of lack of business continuity and separation from a company in this form of commerce.

• Partnership Firms

Partnerships are agreements between two people or more to manage a business together. The company’s success depends on the mutual work and agreement of the partners. If the company suffers a loss, all partners are required to share it in an orderly fashion. Control and decision-making rights belong to active partners alone.  

What are Business Activities?

Business activities include anything a company does over the course of its lifetime, with the goal of making money. The term is used to encompass all economic activities carried out by a business.

Any action a company takes with the primary goal of profit can be considered a business activity. It is a broad term that refers to a company’s economic actions in the course of doing business. These activities are continual and aimed at increasing shareholder value.

What do we need to Understand Business Activities?

If a company is operating, they are using cash to pay for goods and services. Investing uses up cash. The financing provides money that can be later re-paid or borrowed. A company’s cash flow statement will keep track of the changes in its net income, but also all the other financial information it has in order to show a complete view of its finances.

The goal of cash flow is to take into account all items that affect whether a company has enough cash. Non-cash transactions are either added or removed in order to show only the company’s cash basis transactions.

Types Of Business Activities

•  Managing Our Operating Activities

The first section of the cash flow statement accounts for changes in cash levels over a specified period and consists of many items on the income statement, such as depreciation and amortization. Operating cash flow impacts net income on the income statement but does not affect whether a company has positive or negative cash flow. Negative operating cash flow is not common outside of nonprofits.

• Investing Activities Section

One of the important sections of a cash flow statement is the investing activities section. In this section, long-term assets are shown. This section also tracks capital expenditures including assets that are not an asset.

• Financing Business Activities

The final section of the cash flow statement includes financing activity, such as initial public offerings, secondary offerings and debt financing. It also lists dividend payments, shares buyback and interest payments. Funding expenses are included in this section of the cash flow statement.

Examples of Business Activities

• Crafting a Budget: A company’s budget is used to create a plan for upcoming business expenses. The managers discuss how much of their revenue will be spread out among different departments for ongoing operations, and then an overall budget is created that will track how much money the company spends and generates each year. The previous year’s numbers are used as guidelines to create the next year’s spending plan.
• Accounting Operations and Management: Accounting involves managing the flow of money into and out of the company. Payroll, customer credit accounts, collections and tax accounting are in the accounting group. The accounting group also monitors company costs and maintains financial relationships with vendors and customers.
• Marketing Plans and Brand Recognition: Marketing is a way to gain brand recognition. The marketing group develops comprehensive plans that use sales projections to help companies determine the best way to use their resources
•  Growing Sales and Building Relationships: Sales is a group within the company that largely handles customer relations. Their connections with existing and potential clients let them both bring in new customers and retain old ones, along with matching up whatever needs they have with the best solutions they have to offer.
• Hiring Qualified Employees: The human resource aspect of any company is crucial, as it’s important to the upkeep and expansion of a company. It needs to actively search out qualified candidates that already match positions available or can be kept on standby should personnel need to arise.
• Customer Service and Preserving Relationships: Customer Service helps the company maintain a positive relationship with customers by resolving any issues they may have. Customer Service is not responsible for expanding the company’s customer base though, this responsibility falls to Sales. Customer service handles any customer comments/complaints relating to shipping, product or billing.

Conclusion

Business activities are events that are being undertaken by a corporation for the sole purpose of a profit. Operating activities relate directly to the business serving its goods to the market, everything including manufacturing, distributing, marketing, and selling; it provides most of the company’s cash flow. Investing activities mainly relate to the long-term use of cash, for example buying or selling a property or piece of equipment/product. Financing activities include the provenance of cash from investors or banks or corporate sectors, and the uses of cash paid to shareholders, such as payment of dividends or stock repurchases.