What is the purpose of the cash flow statement?

Question

To show the net worth of competitors

To show profitable areas in the market

To enable management to plan for future cash expenditures

To report on the least and most profitable products or services

Answer 1

The primary purpose of the cash flow statement is to enable management to plan for future cash expenditures.

A cash flow statement provides a detailed analysis of what happened to a business’s cash during a specific period, highlighting cash inflows and outflows from operating, investing, and financing activities. This information is crucial for management to understand the company's liquidity, assess its ability to meet obligations, and make informed decisions about future expenditures and investments.