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Of the three major activities of a firm, are cash transactions associated with running the business.

Question

Of the three major activities of a firm,

are cash transactions associated with running the business.

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Solution

The three major activities of a firm typically include operating, investing, and financing activities. Among these, cash transactions associated with running the business primarily fall under operating activities.

Operating activities involve the primary revenue-generating activities of the business. This includes all cash transactions that relate to day-to-day operations, such as:

  1. Cash Receipts from Customers: Money received from the sale of goods and services.
  2. Cash Payments to Suppliers: Payments made for inventory or services purchased.
  3. Cash Payments to Employees: Salaries and wages paid to the workforce.
  4. Other Cash Payments: Expenses such as rent, utilities, and other operating costs.

In summary, operating activities encompass all cash flows that are essential for the company's normal business operations, and they reflect how cash is generated and utilized in the daily running of a firm.

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