What is the purpose of a statement of cash flows?

The purpose of a statement of cash flows is indeed to assess the cash position of a business and the resources used during a specific period. This financial statement provides insights into how cash is generated and spent, categorizing the cash flow into three main activities: operating, investing, and financing. By analyzing the cash flows, stakeholders can evaluate the company's liquidity, financial flexibility, and overall cash management.

This statement stands out because it focuses specifically on cash, distinguishing it from other financial statements like the income statement and balance sheet, which may include non-cash items. Understanding how cash moves in and out of a business is vital for informed decision-making regarding operations, investments, and cash reserves.