Why is the statement of cash flows important?
A)of the three required financial statements,it is the only one which reports changes which took place during an accounting period.
B)it indicates the asset and liability position of a company by reflecting the amounts and types of its assets and liabilities at the beginning and end of the period.
C)it summarizes the information already reported in the income statement and statement of financial position.
D)it explains the sources and uses of cash during the period.

Question

Quizplus · Accepted Answer

The statement of cash flows is important because it explains the sources and uses of cash during the period. This information helps users of financial statements understand how a company is generating and using its cash, which is crucial for assessing its liquidity and overall financial health. The other options listed (A, B, and C) are descriptions of the other financial statements (income statement and statement of financial position), but they do not explain why the statement of cash flows is specifically important.

Why Is the Statement of Cash Flows Important