What is the primary purpose of a statement of cash flows?

The primary purpose of a statement of cash flows is to provide information about a company's inflows and outflows of cash over a specific period. This financial statement is crucial because it helps stakeholders understand how a company generates cash from operating activities, invests cash in its operations, and finances its activities through borrowing or equity contributions. By analyzing the cash flow statement, users can assess the entity's liquidity, solvency, and overall financial health.

This statement categorizes cash flows into three main sections: operating, investing, and financing activities. The operating section shows cash transactions related to a company's core business operations, while the investing section focuses on cash used for acquiring and disposing of long-term assets. The financing section details cash movements related to borrowing and equity transactions.

In contrast, the other options focus on different aspects of a company's financial performance or position: summarizing revenues and expenses pertains to the income statement, recording inventory purchases relates to bookkeeping transactions rather than cash flow reporting, and detailing shareholder equity changes is the focus of the statement of changes in equity. Thus, the statement of cash flows serves a unique and critical role in presenting a complete picture of a company's cash management.