Answer (D) is correct . The statement of cash flows is not designed to provide information with respect to the efficient and profitable use of the firm’s resources. Financial reporting provides information about an enterprise’s performance during a period when it was under the direction of a particular management but does not directly provide information about that management’s performance. Financial reporting does not try to separate the impact of a particular management’s performance from the effects of prior management actions, general economic conditions, the supply and demand for an enterprise’s inputs and outputs, price changes, and other events.
Answer (A) is incorrect because The primary purpose of a statement of cash flows is to provide information about the cash receipts and payments of an entity during a period. A secondary purpose is to provide information about investing and financing activities. The statement should help users to assess the entity’s ability to generate positive future net cash flows, the ability to meet its obligations and pay dividends, the need for external financing, the reasons for differences between income and associated cash receipts and payments, and the cash and noncash aspects of the entity’s investing and financing activities.
Answer (B) is incorrect because The primary purpose of a statement of cash flows is to provide information about the cash receipts and payments of an entity during a period. A secondary purpose is to provide information about investing and financing activities. The statement should help users to assess the entity’s ability to generate positive future net cash flows, the ability to meet its obligations and pay dividends, the need for external financing, the reasons for differences between income and associated cash receipts and payments, and the cash and noncash aspects of the entity’s investing and financing activities.
Answer (C) is incorrect because The primary purpose of a statement of cash flows is to provide information about the cash receipts and payments of an entity during a period. A secondary purpose is to provide information about investing and financing activities. The statement should help users to assess the entity’s ability to generate positive future net cash flows, the ability to meet its obligations and pay dividends, the need for external financing, the reasons for differences between income and associated cash receipts and payments, and the cash and noncash aspects of the entity’s investing and financing activities.
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