Which financial statement is used to track cash flows from operating, investing, and financing activities?

• A. income statement
• B. cash flow statement
• C. balance sheet
• D. statement of changes in equity

Answer: (B)

The cash flow statement is the financial report that shows how cash moves through the business, broken into operating, investing, and financing activities. It reveals the actual cash generated or used in day-to-day operations (operating), cash spent on or received from long-term assets and investments (investing), and cash movements related to borrowing, repaying debt, issuing equity, and paying dividends (financing). This is different from the income statement, which tracks profitability but not cash timing, the balance sheet, which shows what the company owns and owes at a moment in time, and the statement of changes in equity, which shows movements in equity accounts. The cash flow statement uniquely traces cash in and out across these three activity areas, providing essential insight into liquidity and cash management.