What is the primary use of a cash flow statement?

The primary use of a cash flow statement is to provide insight into a company's liquidity, which refers to its ability to meet short-term obligations and manage cash flows effectively. This financial statement outlines all cash inflows and outflows over a specific period, enabling stakeholders to see how the company generates cash from operations, invests in assets, and manages its financing activities.

Understanding liquidity is crucial for assessing the financial health of a business, as it helps in determining whether a company can cover its immediate expenses and continue its operations without facing financial distress.

In contrast, while profitability (as mentioned in other options) indicates how much profit a company is making, it does not necessarily reflect cash availability. Similarly, detailing fixed asset purchases is a part of cash flow from investing activities, but the cash flow statement as a whole serves a broader purpose of assessing liquidity rather than just focusing on specific assets. Finally, summarizing owner's equity pertains more to the balance sheet and does not directly relate to cash flows.