Operating activities definition. Analyzing the definition of key terms often provides more insight about concepts. Operating activities can be defined as – Activities that involve the production or purchase of merchandise and the sale of goods or services to customers, including expenditures related to administering the business. Cash flows from operating activities is one of the three main sections of a statement of cash flows. Operating activities is often the largest part of the statement of cash flows. When preparing a statement of cash flows we can use either a direct method or an indirect method. The part of the statement of cash flows that will differ between a direct method and an indirect method will be the cash flows from operations section. An indirect method, will start the operating activities section with net income, net income from the income statement, and report adjustments to arrive at cash flows from operations. A direct method will basically take the income statement and rework each line to move from an accrual method to a cash method, the bottom line being cash flows from operations.
