Future Business Leaders of America (FBLA) Business Calculations Practice Test

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Dive into the FBLA Business Calculations Test. Sharpen your analytical skills with multiple-choice questions and gain insights with detailed explanations. Excel in your exams!

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What is the primary purpose of a cash flow statement?

To show profitability
To analyze liquidity
To detail expenses
To summarize revenues

The correct answer is: To analyze liquidity

The primary purpose of a cash flow statement is to analyze liquidity. It provides critical insights into how much cash is generated and used during a specific period, detailing the cash inflows and outflows from operating, investing, and financing activities. Liquidity is essential for a business as it indicates the ability to meet short-term obligations and manage its operational expenses. Unlike other financial statements that focus on profitability, such as the income statement, the cash flow statement emphasizes the actual movement of cash. This allows stakeholders to assess the company's financial health, ensuring that the organization has sufficient cash to support its operations and investments. Understanding liquidity through the cash flow statement helps management make informed decisions regarding cash management and funding strategies. The other options focus on aspects such as profitability, detailing expenses, and summarizing revenues, which are indeed important but do not capture the main goal of the cash flow statement, which is centered around liquidity management.