Cash flow arising from operating activities is a key indicator of the extent to which the business operations of the enterprise have generated cash. It indicates whether adequate cash is generated to maintain the Business Operations, Pay dividends, repay loans and make new investments. It is also helpful in forecasting future cash flow from operations. Operating Activities are the Principal Revenue Producing Activities of the Enterprise and other activities that are not INVESTING or FINANCING activities. Thus, cash flow from Operating Activities arises from Principal Revenue Producing Activities of the Enterprise that determine the net profit or loss. Principal Revenue Producing Activities Principal Revenue Producing Activities Business activities being carried by the enterprise to earn profit. Examples of Principal Revenue Producing Activities For a Computer Manufacturing Company, Manufacturing and selling of computers is its Principal Revenue Producing Activities . 1. 2. For a Trading Company, Purchase and sale of goods is its Principal Revenue Producing Activities. 3. For a Finance Company, Giving and Taking Loans, Purchase and Sale of Securities is its Principal Revenue Producing Activities. Few examples of operating Activities 1.Cash Sales. 2. Cash Purchases. 3. Rent paid. 4. Income Tax Paid. 5. Office Expenses. 6. Sale of Machines by a Machine Dealer. 7. Cash Paid to Trade Payables. 8. Income Tax Refund Received. 9. Cash Received From Debtors 10.comission paid.

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