Question

What function does the statement of cash flows serve, as one of the four basic financial statements?

a) Reports financial position at a specific point in time
b) Provides a summary of revenues and expenses
c) Details changes in cash position over time
d) Presents a snapshot of stockholders' equity

Answer 1

The statement of cash flows serves to detail the changes in a company's cash position over time, unlike other financial statements that report financial position, performance, or equity at a specific point.

Step-by-step explanation:

The statement of cash flows serves as one of the four basic financial statements by detailing the changes in cash position over a period of time. Unlike the balance sheet that provides a financial snapshot at a specific point in time, or the income statement that summarizes revenues and expenses, the statement of cash flows breaks down how cash is generated and used in operations, investing, and financing activities. The statement of cash flows captures the liquidity and viability of a company, and it is an essential tool for stakeholders to assess the financial health and cash flow management of a business.