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Which activity is the main revenue generating activities of the enterprises
  • a)
    Cash flow from management activities
  • b)
    Non Cash transactions
  • c)
    Cash flow from operating activities
  • d)
    Cash flow from investment activities
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
Which activity is the main revenue generating activities of the enterp...
The main revenue generating activity is the operating activities.
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Which activity is the main revenue generating activities of the enterp...
Cash flow from operating activities is the main revenue generating activity of enterprises. In this activity, the cash flow is generated from the core operations of the business. It reflects the cash inflows and outflows resulting from the day-to-day operating activities of the enterprise.

Operating activities include the production, sales, and delivery of goods or services, as well as any other activities that are directly related to the main revenue-generating function of the business. These activities are essential for the growth and sustainability of the enterprise.

Below are the reasons why cash flow from operating activities is considered the main revenue generating activity:

1. Revenue Generation: Cash flow from operating activities primarily includes cash received from customers for the goods or services provided. This revenue is the main source of income for the enterprise and directly contributes to its financial performance.

2. Cost Management: Operating activities also involve cash outflows for various expenses, such as the purchase of raw materials, payment of salaries and wages, and other operating expenses. Efficient cost management is crucial for generating positive cash flow from operating activities.

3. Sustainable Operations: Cash flow from operating activities ensures that the business can sustain its day-to-day operations. It covers the costs of running the business and allows for reinvestment in the core activities to drive further growth.

4. Indicator of Profitability: Positive cash flow from operating activities is generally an indicator of the enterprise's profitability. It shows that the business is generating more cash inflows than outflows from its core operations.

5. Cash Flow Stability: Cash flow from operating activities is generally more stable and predictable compared to cash flows from other activities such as financing or investment. This stability allows the enterprise to better manage its cash flow needs and make strategic decisions.

In conclusion, cash flow from operating activities is the main revenue generating activity of enterprises as it reflects the cash inflows and outflows from the core operations of the business. It is crucial for revenue generation, cost management, sustainable operations, profitability, and cash flow stability.
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Which activity is the main revenue generating activities of the enterprisesa)Cash flow from management activitiesb)Non Cash transactionsc)Cash flow from operating activitiesd)Cash flow from investment activitiesCorrect answer is option 'C'. Can you explain this answer?
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