Why is the statement of cash flows important?

The statement of cash flows is crucial because it provides insights into a company's liquidity and cash management. This financial statement outlines how cash is generated and spent during a specific period, allowing stakeholders to understand a company's cash inflows and outflows from operating, investing, and financing activities.

Understanding cash flow is essential for evaluating the company's ability to meet its short-term obligations and maintain operations. It highlights how well a company can generate cash from its core operations, invest in growth opportunities, and finance its expenses and debts sustainably. This information is invaluable for investors, creditors, and management when making informed financial decisions.

The other options do not capture the primary purpose of the statement of cash flows. While profit is an important metric, it does not provide a complete picture of cash availability. The statement does not focus on the details of liabilities directly, nor does it concentrate solely on revenue generated, as cash flows can be influenced by other factors beyond just sales.