The primary purpose of a statement of cash flows is to provide relevant information about:
a. The cash receipts and cash disbursements of an enterprise during a period.
b. Differences between net income and associated cash receipts and disbursements.
c. An enterprise's ability to generate future positive net cash flows.
d. An enterprise's ability to meet cash operating needs.
Explanation
Choice "a" is correct. The primary purpose of a statement of cash flows is to provide relevant information about the cash receipts and cash disbursements of an enterprise during an accounting period.
Choice "b" is incorrect. The operating activities section of the statement of cash flows provides information about the differences between net income and associated cash receipts and disbursements. However, this is not the primary purpose of a statement of cash flows.
Choice "c" is incorrect. The statement of cash flows is an analysis of historical cash flows rather than a projection of an enterprise's ability to generate future cash flows.
Choice "d" is incorrect. The statement of cash flows is an analysis of historical cash flows rather than a projection of an enterprise's ability to meet cash operating needs.
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