The 3 Core Business Activities

No matter what business you run, everything you do fits into 3 types of activity.

Every business, no matter the size, has three types of activity that accountants and CFOs identify, each one building on each other.

First is financing. This is how a business raises money to exist in the first place, and can be done either through debt or equity financing.

With debt financing, you have to pay back what you borrowed plus interest — no matter what. With equity financing, you don't owe anything back, but you give up a portion of the business in exchange for cash.

The next type of activity is investing. Once financing brings cash in the door, investing is what turns that cash into the actual stuff a business runs on — equipment, buildings, whatever it needs to physically function.

Companies don't always spend every dollar right away, though. When there's cash sitting around that isn't needed immediately, it's common to put it into stocks or bonds instead of just letting it sit idle.

And the final and most important type of activity is operating. With the assets in place, operating is everything the business does day in and day out to actually make and move its product or service, and it's where revenue and expenses both come into play.

Operating involves the core activities that allow a business to run but it isn't possible without the support of financing and investing.