A business is a company or organisation that makes money by selling goods or services. The most important aspect of this definition is that a business exists to make money. Although not all businesses are profitable, their primary goal is to generate profits. In layman's terms, a business is the sale of goods that are either manufactured by the organisation or obtained from other manufacturers or dealers. It also includes the sale of services for a profit. Read the complete blog to know more about what are the different business activities.
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Business activities are a must and need to be reformed and advanced from time to time to earn a competitive advantage against other players in the market. A company needs to adopt strategies that help it become more resourceful and successful.
What are Business Activities?
Traditional businesses worked solely on profit motive but in the modern world, businesses revolve around customer satisfaction as its main aim. Business activities include all economic activities that are directly or indirectly related to making goods and services available to consumers and generating profit through customer satisfaction, hence, all business activities rely on one another to ensure a consistent process and cannot be solely focused on customer satisfaction.
Business activity is thus defined as the measures that companies take in order to make money. These may include activities like manufacturing of goods, Talent acquisition, Training of employees, creating or purchasing inventory, creating a website, advertising and a variety of other tasks. Business activities generate revenue and ensures continuity of business. Services are also a part of business activities.
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Classification of Business Activities
Business activities can be classified based on the variables used for classification. Accountants base them on the nature of activities conducted in terms of Cash Flow.It is frequently divided into three categories: operating activities, investing activities, and financing activities. Operating activities are the most important of these because they have the most direct impact on a company's performance.
Business activities can be classified in a variety of ways, depending on the criteria being used. Some common ways to classify business activities include:
1. By sector:
Business activities can be classified by the sector in which they operate, such as. manufacturing, retail, healthcare, finance, or technology.
2. By size:
It can also be classified by the size of the organization, such as small, medium, or large.
3. By type of ownership:
Business activities can be classified by the type of ownership, such as sole proprietorship, partnership, corporation, or cooperative.
4. By type of product or service:
Such activities can be classified by the type of product or service they offer, such as consumer goods, industrial goods, or services
5. By stage of the product life cycle:
Business activities can be classified by the stage of the product life cycle in which they are involved, such as research and development, production, marketing and sales, or customer support.
6. By geographic location:
Business activities can also be classified by the geographic location in which they operate, such as local, national, or international. The specific criteria used to classify business activities will depend on the purpose of the classification and the needs of the organization.Business activities can be classified in a variety of ways, depending on the criteria being used.
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The specific criteria used to classify business activities will depend on the purpose of the classification and the needs of the organisation. Here’s 3 main business categories below:
Operating Activities
All business activities that are directly or indirectly related to the provision of goods and services are referred to as operating activities. They are the core of all business activities like production, sales and marketing. These activities have a direct impact on cash flow and, ultimately, income. These activities generate cash outflows, and their successful execution contributes significantly to cash inflows.
Investing Activities
Investing activities are any activities that are intended to be capitalised for a period of more than a year. Capital expenditure includes the purchase of long-term assets or real estate. e.g., Machinery, land, buildings etc. Investing activities begin when a company purchases and sells real estate, machinery, and equipment. The cash inflow and outflow during a specific period when the company invests are depicted in the cash flow statement's investment activities section.
Financing Activities
Financing activities are any activities that fund a business but are not directly related to revenue from goods and services. Bonds, loans, and stock offerings are examples of common financing activities. Financing activities are associated with raising funds for financial stability and business expansion. The cash flows used and created by each of these activities are listed in the cash flow statement. The cash flow statement is intended to be a reconciliation of net income on an accrual basis to cash flow. They may use the fund to invest in long-term projects and to support day-to-day operations. It depicts the cash flow between the company, its investors, and creditors. As a result, an entity's financing activities shed light on its capital structure: the proportion of equity and debt used.
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Industrial Activity for Business
Industry refers to economic pursuits associated with the transformation of raw materials into usable goods. Activities involving machines, mechanics and technical knowledge are referred to as industries. These encompass tasks involved in manufacturing or processing products, even activities like mining and fisheries, or other small scale and large-scale firms. The term "industry" can also refer to a collection of businesses making related or comparable products.
In a business activity context manufacturing, processing, assembling, and other types of production are important. It is an important aspect of many businesses, as it allows companies to efficiently produce and sell goods and services, and can be a significant contributor to economic growth and development.
The Primary Sector
The primary sector includes activities like extraction, harvesting, and simple conversion of natural resources. Mining, agriculture, plantations, and fisheries are some of the sub-sectors that are created from these activities. Primary sector usually entails using natural resources and converting them into raw materials for further use. Output from the primary sector goes out to the secondary sector.
The Secondary Sector
The secondary sector mainly entails activities like Construction and manufacturing. Raw materials are converted by manufacturers into finished or semi-finished products. The final products are subsequently processed by other manufacturers using the semi-finished products. Overall, the manufacturing industry creates the finished goods.
Tertiary Sector
The tertiary sector is the service sector. It includes services provided by doctors, lawyers, engineers, teachers etc. All the three sectors are interdependent. This is the largest sector of the economy. An economy is said to be growing if the tertiary sector expands and the primary sector is relatively smaller. There is growing demand for schools, colleges restaurants, hospitals, hotels all of which comes under the purview of service or tertiary sector.
Due to the interdependence of all the sectors, no sector can produce without the assistance of another. This may result in a chain of production where each sector contributes to the creation of the good and raises the value of a good or service.
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Commerce in Business
Commerce is the act of trading goods and services. Commerce is broadly divided into trade and trade-related activities. Trade is the buying and selling of products. It is the voluntary exchange of commodities or services between various economic entities i.e., producers and consumers. The act of purchasing, selling, or exchanging products and services is known as trade. There are typically two forms of trade. They are domestic trade and foreign trade. Trade-related activities, which mainly involve the act of purchasing or selling goods or services, include anything that contributes to this outcome. Online sales platforms, for example, are an example of a service that assists people in buying and selling products.
What Business Activities are Included in Commerce?
Commerce refers to the exchange of goods and services, and includes a wide range of business activities that involve buying and selling, trading, and distribution. Auxiliaries to trade include activities like Transport, warehousing, insurance, communication, marketing, advertising, packaging, and banking. Therefore, commerce encompasses both the purchasing and selling of things, etc. Therefore, it is argued that the activities involved in commerce involve removing obstacles such as people, places, times, risks, finances, and information from the process of exchanging products and services.
Conclusion
Business activities refer to the various tasks and processes that are involved in running and operating a business. These activities can be divided into several categories, including production, marketing, sales, customer service, finance and accounting, human resources, operations, and research and development. The specific business activities a company engages in will depend on its industry and business model, and may include manufacturing and selling goods, providing services, managing financial resources, recruiting and training employees, and more. Business activities are essential to the success and growth of a company, and can help it achieve its goals and objectives.
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