What does the statement of cash flows primarily report?

The statement of cash flows primarily reports the change in cash and cash equivalents, which provides insight into a company’s cash inflows and outflows over a specific period of time. This financial statement is crucial because it helps stakeholders understand how an organization generates and uses cash, highlighting its liquidity and overall financial health.

The statement is divided into three main sections: operating activities, investing activities, and financing activities. This breakdown allows users to see where cash is coming from (such as receipts from customers) and where it is going (such as payments to suppliers or investing in capital assets). By focusing on cash rather than accrual accounting measures like net income or equity, the statement of cash flows offers a clear view of a company's cash-generating ability.

The other choices, while related to a company's financial performance, do not directly address the specific focus of the statement of cash flows. Profitability and net income are assessed through the income statement, while equity position refers to the balance sheet, highlighting the importance of each financial statement serving a distinct purpose in financial reporting.