What is the primary purpose of the Cash Flow Statement?

The primary purpose of the Cash Flow Statement is to illustrate the flow of money in and out of the business. This financial statement provides crucial insights into a company's liquidity and cash management by detailing how cash is generated and spent during a specific period. It breaks down cash flows into three categories: operating activities, investing activities, and financing activities.

This information is vital for stakeholders, as it helps them understand how well the company can generate cash to meet its obligations, invest in future growth, and respond to financial challenges. By analyzing the cash flow, investors and management can assess the company’s operational efficiency and financial stability, making it an essential tool for financial decision-making.

While the other options relate to financial reporting, they do not capture the primary function of the Cash Flow Statement. Changes in owner's equity and financial performance relate more closely to the equity section of a company's balance sheet and the income statement, respectively. Assessing liquidity ratios typically involves examining various financial statements, including the balance sheet and income statement, rather than focusing solely on cash flows.