What is the purpose of a cash flow statement?

The purpose of a cash flow statement is to provide information about cash inflows and outflows during a specific period. This financial statement is crucial because it helps stakeholders, including management, investors, and creditors, assess the liquidity, solvency, and financial flexibility of an organization. By tracking the movement of cash, the cash flow statement reveals how well a company generates cash to fund its operating expenses and pay debts, highlighting the sources of cash as well as the areas where cash is being spent.

The cash flow statement typically categorizes cash activities into three segments: operating, investing, and financing activities. This categorization provides insights into how cash is generated from operations, how investments are being funded, and how financing is structured. As a result, users of the statement can make informed decisions regarding the company's financial health and future cash needs.

In contrast, the other options address different aspects of financial reporting. For example, providing information about asset valuation pertains more to the balance sheet, showing how assets are valued at a given point in time. Similarly, while changes in equity are documented in the statement of changes in equity, the cash flow statement does not focus on equity. Summarizing revenue from operations falls within the income statement's domain, which details operating performance