What is the purpose of a cash flow statement?

The purpose of a cash flow statement is to provide information about the cash inflows and outflows during a specific period. This financial statement is crucial because it shows how a company generates and uses cash through its operating, investing, and financing activities. By analyzing the cash flow statement, stakeholders can assess the liquidity, solvency, and overall financial health of the organization.

Cash inflows include money received from operations, investments, and financing, while cash outflows represent payments made in these areas. Understanding these movements is vital for making informed decisions regarding budgeting, investment, and evaluating the company’s ability to meet its short-term obligations.

The other options introduce concepts that are not related to the cash flow statement. For instance, summarizing the company’s financial position at a specific point in time refers to the balance sheet, which highlights assets, liabilities, and equity. Detailing changes in equity over a period relates to the statement of changes in equity, showing how investments and distributions affect equity balances. Finally, listing revenues and expenses pertains to the income statement, which focuses on the profitability of the organization over time rather than the actual cash movements.