What is the purpose of the statement of cash flows?

The statement of cash flows serves a crucial role in financial reporting by providing a detailed account of cash inflows and outflows over a specific period. This financial statement outlines where cash is sourced, such as from operating, investing, and financing activities, and where it is spent. By categorizing cash flows, it allows stakeholders to assess the company's liquidity, solvency, and overall financial health.

Understanding cash flows is essential for various reasons: it reveals a company's ability to generate cash to maintain operations, meet obligations, and invest in growth opportunities. This statement helps users, such as investors and creditors, to evaluate the company’s financial performance beyond what is captured in the income statement and balance sheet, which focus on revenues, expenses, and assets at a snapshot in time.

In contrast, the other options address different financial aspects. Reporting changes in equity focuses on the owners' interest over time and does not specifically detail cash movements. Summarizing revenues and expenses pertains to the income statement, which reflects profitability rather than cash management. Displaying the company's financial position at a specific time relates to the balance sheet, which indicates what the company owns and owes at that moment, without indicating how cash has moved during the reporting period.