How does a statement of cash flows provide value for a company?

The Statement of Cash Flows shows how cash is generated and used by a business over a period of time. It breaks down cash flows into:

Operating activities

Investing activities

Financing activities

This financial statement explains the change in cash and cash equivalents from the beginning to the end of the period.

As per Saylor Academy BUS105:

“The statement of cash flows helps users understand how a company’s cash position changed during a specific time period. It ties together the beginning and ending cash balances.”

Let’s assess the options:

A. This describes a balance sheet.

B. This describes the income statement.

C. This describes the statement of retained earnings or statement of changes in equity.

D. Correct — this describes the purpose of the statement of cash flows.

Answer: D