Describe the purpose of the cash flow statement.

The cash flow statement serves a crucial role in financial accounting as it provides an overview of the cash inflows and outflows of a business during a specific period. This financial statement illustrates how cash is generated and spent, which is vital for assessing a company's liquidity, financial health, and overall cash management. By categorizing cash flows into operations, investing, and financing activities, the statement allows stakeholders to understand how well the company generates cash to fund its operational needs, invest in growth opportunities, and meet its financial obligations.

This information is particularly useful for investors, creditors, and management, as it offers insights into the company's ability to generate cash from its core business operations and the sustainability of its cash flows going forward. Understanding cash flows is essential for making informed financial decisions, as profit alone does not necessarily reflect the cash position of the business.

Other options do not accurately represent the purpose of the cash flow statement. For instance, summarizing equity changes pertains more to the statement of changes in equity, detailing long-term asset acquisitions would relate to investing activities within the statement but does not encapsulate the entire purpose of the cash flow statement, and outlining the company’s capital structure is more relevant to the balance sheet. Thus, option C effectively captures the essence of what