Once
you have completed this chapter, you should be able to:
1Identify financing activities and explain
why they are important to a business.
2Demonstrate how accounting
measures and records business activities.
3Identify investing activities and explain why
they are important to a business.
4 Identify operating activities and explain how they
create profits for a company.Describe
how financial reports summarize business activities and provide information for business decisions.
A business is
an organization that exists for the purpose of making a profit for its owners. A business creates a
profit if it can sell goods and services to customers at prices that are greater than the total costs incurred to
provide those goods and services. To be successful, a business must be effective in meeting the needs of
customers by providing goods and services demanded by customers at
prices they are willing to pay. Also, a business
must be efficient in controlling costs so that the prices charged to customers
exceed the costs to the company of
acquiring and selling its products. If a company is successful, it creates value for its owners as well as
for other stakeholders. Profit is a measure of the value created by a business for its owners.
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