Which statement about the statement of cash flows is NOT true?

Which statement about the statement of cash flows is NOT true?

• A. The statement shows a company's financial position at a specific point in time.
• B. It is often used in tandem with the income statement to determine a company's true financial performance.
• C. It reports a company's sources and uses of cash during the accounting period.
• D. There are three types of cash flows: cash flows from operating activities, from investing activities, and from financing activities.

Answer: (A)

The statement of cash flows tracks how cash moves over a period, breaking those movements into operating, investing, and financing activities. This focus on actual cash inflows and outflows over time helps you see whether a company is generating cash from its core business and how it uses cash in investing and financing activities. The idea that it shows the financial position at a specific point in time is not true—the balance sheet provides that snapshot of financial position. The cash flow statement is typically read alongside the income statement to assess cash generation and the quality of earnings, and it explicitly shows sources and uses of cash during the period.

The statement of cash flows tracks how cash moves over a period, breaking those movements into operating, investing, and financing activities. This focus on actual cash inflows and outflows over time helps you see whether a company is generating cash from its core business and how it uses cash in investing and financing activities. The idea that it shows the financial position at a specific point in time is not true—the balance sheet provides that snapshot of financial position. The cash flow statement is typically read alongside the income statement to assess cash generation and the quality of earnings, and it explicitly shows sources and uses of cash during the period.