What is operating activity

Operating activities are the main activities that a company performs to gain profits. Those activities affect the cash flow getting in and out and determine the net profit of the company.

Some major operating actions for the company are sales, customer service, administration and marketing. These activities are part of the regular functioning of a company that affects its monthly, quarterly and annual income and earnings. They also give the majority of the cash flow and manage profitability.

The operating activities of a company are found in the business’ financial records especially the cash flow statement and the earnings statement.

The operating activities section in these reports is considered the most essential section since it provides cash flow data compared to the daily operations of the company and allows stakeholders to see the viability of the company. It also manages the business’ ability to pay its current charges such as labour costs and debt payment.

The operating activities that occur in income generation are:

• Cash receipts from sales
• Settlements of lawsuits and insurance claims
• Income received from the investment
• Supplier refunds
• Accounts receivables collection
• Sales of shares

The operating activities that occur in cash outflows are:

• Supplier payments
• Tax payments
• Refunds to customers
• Settlements of fines and lawsuits
• Interest to creditors
• Equipment purchase
• Interest payment on loans and dividends
• Employee payments

In the statement of money flows, the cash flow from those activities is placed in the operating activities section. They are centred on changes in the current assets and current liabilities and the net profit. Cash flow report also lists the cash flow from investing and financing actions.