International Association of Accessibility Professionals (IAAP) Certified Administrative Professional (CAP) Practice Exam

What information do cash flow statements contain?

1. Only income from sales

2. Only expenditures

3. Sources of income and cash expenses

4. Assets and liabilities

The correct answer is: Sources of income and cash expenses

Cash flow statements provide a detailed overview of the cash inflows and outflows of a business over a specific period. They are a crucial part of financial statements as they show how cash is being generated and used. The correct choice captures the essence of this financial tool by highlighting both sources of income and cash expenses. Sources of income include all forms of cash inflows, such as receipts from sales, loans, and other income-generating activities. Cash expenses encompass all cash outflows, such as payments to suppliers, operational costs, payroll, and other expenditures necessary for running the business. This comprehensive view helps stakeholders understand how well a company manages its cash, ensuring it can meet obligations and invest in future growth. The other options are limited in scope. Focusing solely on income from sales ignores other potential cash generators, while only considering expenditures overlooks essential inflow information. Mentioning assets and liabilities pertains more directly to the balance sheet rather than the cash flow statement, which is focused on cash movements rather than static financial positions.