Which one of the following is a principal function of the cash flow statement?
A)To evaluate the level of debt and leverage of a company
B)To predict future profit growth
C)To calculate the turnover of inventory
D)To predict the ability to pay debts and dividends

Question

Quizplus · Accepted Answer

The principal function of the cash flow statement is to predict a company's ability to pay its debts and dividends. It provides information on the cash inflows and outflows from operating, investing, and financing activities, which helps investors and creditors assess a company's liquidity and cash flow trends. Choices A and C are not the principal functions of the cash flow statement, and choice B is not its purpose at all.

Which One of the Following Is a Principal Function of the Cash