What is the main objective of preparing a statement of cash flows?

The main objective of preparing a statement of cash flows is to provide insight into cash inflows and outflows. This financial statement is essential as it offers a clear picture of how cash is generated and used during a specific period. It highlights the sources of cash such as operating activities, investing activities, and financing activities, allowing stakeholders to assess the company's liquidity, cash management, and overall financial health.

Understanding the cash flow position is critical for investors, creditors, and management, as it reflects the actual cash available for day-to-day operations, future investments, and obligations. Unlike other financial statements that might focus on profitability or accrued income, the statement of cash flows emphasizes cash transactions, which are vital for assessing the company's ability to meet its short-term liabilities and to sustain operations.

Other options touch on different aspects of financial reporting but do not focus explicitly on cash flows. Reporting on changes in equity typically involves the statement of changes in equity, while summarizing the financial position at year-end pertains to the balance sheet. Showing revenue and expenses by category relates more to the income statement. Each of these financial statements serves its own purpose, but none provides the same level of detail regarding cash movements as the statement of cash flows does.