Which statement accurately describes the purpose of a cash flow statement?

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A cash flow statement is about how cash moves in and out of the business over a period, showing the actual cash generated or used by the company and how those movements relate to its overall funding needs. It helps you see whether the business has enough cash to meet obligations, invest in growth, and repay debt, not just whether it earned a profit. The cash flow statement breaks its activities into three parts: cash from operating activities (the core business that brings in cash, like customers paying invoices and suppliers being paid), cash from investing activities (capital expenditures, purchase or sale of long-term assets), and cash from financing activities (borrowing, repaying loans, issuing or repurchasing stock, paying dividends). By combining these, you get the net change in cash for the period and the ending cash balance, which directly reflects liquidity.

The other options miss this focus. Showing cash at a single point in time is a balance sheet trait, not the cash flow statement. Listing only non-cash transactions would ignore the primary cash movements the statement is built to reveal. And measuring profitability is the role of the income statement, while the cash flow statement targets liquidity and cash availability.