DECA Financial Consulting Complete Practice Exam

The purpose of a cash flow statement is to provide a summary of cash inflows and outflows for a specific period. This financial statement is essential for understanding how a company generates cash from its operating activities, as well as how it spends that cash on investments and financing activities. By examining the cash flow statement, stakeholders can assess the liquidity position of the company, ensuring that it can meet its short-term obligations and maintain operations effectively.

In contrast, showing the company's total revenue focuses solely on income generated from sales, which does not give insight into cash management. Detailing the company's liabilities is the domain of the balance sheet, which outlines what the company owes but does not track cash movements. Predicting future revenue streams relates more to financial forecasting and planning rather than recording past cash movements. Thus, the cash flow statement plays a vital role in revealing the cash health of an organization, making it easier to make informed financial decisions.