Final answer:
The statement of cash flows reports on an entity's operating, investing, and financing activities during a period. Money on a bank's balance sheet may not be present as physical cash due to loans and other investments. The value of loans in the secondary market varies based on the borrower's reliability and changes in economic interest rates.
Step-by-step explanation:
The statement of cash flows is a financial report designed to provide information about an entity's operating, investing, and financing activities during a specific period. It aims to show the cash inflows and outflows in these three areas which help stakeholders understand the company’s cash position. Specifically, the correct statement related to the objective of the statement of cash flows is that it is designed to provide information about the operating, investing, and financing activities of an entity during a period.
The money listed under assets on a bank balance sheet may not actually be in the bank because banks operate as financial intermediaries between savers and borrowers. The assets listed often include loans issued, bonds owned, and reserves, which are not immediately accessible as cash because they are invested elsewhere. When analyzing loans in the secondary market, the value you'd be willing to pay for a loan can vary. If a borrower has frequent late payments, the loan is riskier and thus less valuable. If the economy's interest rates have risen since the loan was issued, the loan's lower interest rate is less attractive, hence its value decreases. However, if the borrower has recently reported high profits or if overall interest rates have fallen since the loan was issued, the risk of default is lower and the loan's rate may be more competitive, thus increasing its value.