Which of the following is considered an operating activity?

Disable ads (and more) with a membership for a one time $4.99 payment

Master the UCF ACG2021 Principles of Financial Accounting Final Exam. Study with comprehensive practice tests, flashcards, and multiple choice questions, each with detailed explanations. Ace your exam!

Operating activities are the primary revenue-generating activities of a company and are related to the core business functions, including the production and sale of goods and services. The sale of inventory directly relates to the company's main operations, as it represents the revenue generated from selling products. This transaction impacts the income statement immediately by contributing to sales revenue, which is essential for assessing a company's operational performance.

In contrast, purchasing equipment pertains to investing activities, as it involves acquiring long-term assets to support production. Paying off loans is classified as a financing activity because it involves managing the company's capital structure and liabilities. Issuing stock is also a financing activity, as it involves raising capital through equity financing rather than engaging in the core operational processes of the business. Overall, the sale of inventory is the most straightforward example of an operating activity that reflects the revenue-generating aspect of the business.