Business Activity is any type of activity that a business undertakes to ensure that its business goals are achieved. There is a vision for every business. The vision provides the direction of growth.
So, once a business understands what it wants to achieve it becomes easier to allocate required resources. We can delegate responsibilities to the specialized teams and then can assess their growth regularly.
Types of Business Activity
There are mainly three types of Business Activities:
- Financing Activities,
- Investing Activities and,
- Operating Activities.
Financing Activities: Business needs funds to continue their operations. They can borrow money either through debt financing or equity financing. It is tough to set up a business that is in its initial phase especially when it is yet to generate revenue. A business can require funds at various stages when it isn’t capable to fund its operations on its own like capacity expansion, R&D investments, etc.
Investing Activities: Once the business has raised enough funds that help run its operations. Then, it invests those funds in plants, equipment, or machinery or can invest in securities that help it increase profits. It can also go through the Mergers and Acquisitions route.
Operating Activities: Once the necessary infrastructure is in place. The business begins to generate revenue by selling goods and services. A business can generate revenue through sales, services, interest income, etc. When the revenue exceeds the costs (or, expenses) it would result in Net income. Though there are other parameters as well that would change the outcome. We don’t consider those parameters here.
