Operational activity of the enterprise

Slide 1. Good day. I offer to your attention a presentation on the topic “operational activity of the enterprise”.

Slide 2. There are three types of company activities: operating, investment, and financial. This division is necessary to more accurately determine the capital turnover in your company, in other words, to assess the efficiency of the enterprise. How do these activities differ, and in what aspects do they divide the movement of money?

Slide 3. Financing activities include transactions involving debt, equity, and dividends. Cash flow from financing activities provides investors with insight into a company’s financial strength and how well a company’s capital structure is managed

Slide 4. Investing activities include cash activities related to noncurrent assets. Noncurrent assets include (1) long-term investments; (2) property, plant, and equipment; and (3) the principal amount of loans made to other entities.

Slide 5. Operating activities generates the majority of the cash flows for the company as it is directly linked to the core business activities of the company.

These activities also determine the profitability of the company and items categorized under this head are the primary revenue units of the company.

Slide 6. Operating activities are distinguished from investing or financing activities, which are functions of a company not directly related to the provision of goods and services. Operating activities are the daily activities of a company involved in producing and selling its product, generating revenues, as well as general administrative and maintenance activities.

Slide 7. Operating cash flow (OCF) is cash generated from normal operations of a business. Operating cash flow is important because it provides the analyst insight into the health of the core business or operations of the company. Without a positive cash flow from operations a company cannot remain solvent in the long run. A negative operating cash flow would mean the company could not continue to pay its bills without borrowing money (financing activity) or raising additional capital (investment activity).

Slide 8. Expenses generated from key operating activities include manufacturing costs, as well as the expenses of advertising and marketing the company’s products or services. Manufacturing costs include all the direct production costs included in cost of goods sold.

Slide 9. The key operating activities that produce revenues for a company are manufacturing and selling its products or services. Sales activities can include selling the company’s own in-house manufactured products or products supplied by other companies, as in the case of retailers.

Slide 10. A cash flow statement is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. Cash flows from operating activities section makes adjustments to net income and excludes non-cash items like depreciation and amortization, which can misrepresent a company’s actual financial position.

A company with strong operating cash flows has more cash coming in than going out.

Still, the net income is the bottom line profit that a company makes and even if a company has positive operating cash flows, can still lose money when all is said and done.

Slide 11. There are two methods for depicting cash from operating activities on a cash flow statement: the indirect method and the direct method.

The indirect method begins with net income from the income statement then adds back noncash items to arrive at a cash basis figure.

The direct method tracks all transactions in a period on a cash basis and uses actual cash inflows and outflows on the cash flow statement.

Slide 12. Operating activities are the core activities of any company, this activity and the operating income assists us to analyze any company from the investment or functional perspective.

Slide 13. Thanks for your attention

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