Understanding financial reports requires an understanding of the activities of the business. Describe at least three operating activities that firms use to generate earnings

Answer 1

Operating activities include the following:

1 . Purchasing. The purchasing department of a retailer, such as Great Deal, acquires items
to sell to customers. The purchasing department of a firm with manufacturing operations,
such as Thames, acquires raw materials needed for production.
2 . Production. The production department in a manufacturing firm combines raw materials,
labor services, and other manufacturing inputs to produce goods for sale. A service firm
combines labor inputs and other inputs to provide services to customers.
3 . Marketing. The marketing department oversees selling and distributing products and services to customers.
4 . Administration. Administrative activities include data processing, human resource management, legal services, and other support services.
5 . Research and development. A firm undertakes research and development with the objective of discovering new knowledge that it can use to create new products, new processes, or new services.