What is the purpose of a cash flow statement?

The purpose of a cash flow statement is to summarize cash inflows and outflows in a specific period. This financial statement provides critical insight into the cash movement of a business, detailing how cash is generated and used within operating, investing, and financing activities.

Understanding cash flows is paramount for stakeholders, as it shows the liquidity of the company, helping them assess the firm's ability to meet its short-term obligations and fund its operations. Unlike the income statement, which focuses on profitability through revenues and expenses, the cash flow statement specifically highlights actual cash transactions, allowing users to evaluate the company's cash management and overall financial health.

Other options, while related to financial statements, do not correctly define the primary function of a cash flow statement. Evaluating profitability pertains more to the income statement, reporting earnings before taxes is specific to measuring taxable income, and listing all assets and liabilities is the focus of a balance sheet. Hence, the answer that emphasizes summarizing cash inflows and outflows is the most accurate representation of the cash flow statement's purpose.