What does the statement of cash flows summarize?

The statement of cash flows is a financial document that provides a comprehensive overview of a company’s cash inflows and outflows across three main categories: operating activities, investing activities, and financing activities. This summary is essential for understanding how well a company generates cash to meet its obligations and fund its operations.

Focusing on the correct choice, the statement of cash flows details:

1. Operating Activities: This captures cash generated from the core business operations, such as cash received from selling goods and services, as well as cash paid for expenses.

2. Investing Activities: This category summarizes cash used for buying or selling long-term assets, such as property, equipment, or investments. It reflects how much cash is being invested in the business or returned from investments.

3. Financing Activities: This section records cash flows related to borrowing and repaying debt, issuing shares, or paying dividends. It indicates how a company manages its capital structure.

This comprehensive view allows stakeholders, such as investors and creditors, to assess the liquidity and financial flexibility of a company. It is critical for evaluating the company’s capacity to generate future cash flows, which directly influences operational sustainability and growth potential.

In contrast, the choices that focus solely