What does a cash flow statement summarize?

A cash flow statement summarizes the cash inflow and outflow during a specific period. This financial statement provides valuable insights into a company’s liquidity by tracking how cash moves in and out of the business. It distinguishes between operating, investing, and financing activities, enabling stakeholders to understand how funds are generated and spent.

This distinction is critical because it highlights the operational efficiency of the company and its ability to sustain operations and meet obligations. For instance, it shows if the business generates enough cash from its core activities or relies on external financing. The cash flow statement is an essential tool for assessing financial health, as it presents a clearer picture of cash availability compared to just looking at revenues and expenses, which can include non-cash items.

The other options focus on different aspects of financial reporting: total revenue and expenses pertain to the income statement, projected earnings relate to forecasting, and the balance sheet addresses assets and liabilities. Each of these serves a unique purpose but does not summarize cash flows.