Question

What is the most important reason for preparing a statement of cash flows?

a) To calculate the change in cash
b) To determine profit margins
c) To analyze market trends
d) To evaluate shareholder equity

Answer 1

The most important reason for preparing a statement of cash flows is to calculate the change in cash.

Step-by-step explanation:

The most important reason for preparing a statement of cash flows isto calculate the change in cash. This statement provides information on how a company generated and used cash during a specific period of time, helping stakeholders understand the cash inflows and outflows of the business. By analyzing the statement of cash flows, investors and managers can assess the liquidity and financial health of the company.