What does a cash flow statement summarize?

The cash flow statement is a financial document that specifically summarizes the total income and spending of a business over a specific period, typically detailing how cash entered and left the business. This statement is crucial because it provides insights into the company’s liquidity, operational efficiency, and overall financial health. It breaks down cash flows into three main activities: operating, investing, and financing activities, illustrating how money is generated from operations, invested in assets, and sourced from financing activities.

This focus on cash movement helps stakeholders understand how a business generates cash and the sources of that cash relative to its expenditures. It is essential for assessing whether a company can maintain and grow its operations without requiring additional financing. The other options deal with different aspects of financial statements: total assets and liabilities focus on the balance sheet, the value of inventory relates to asset management rather than cash flow, and retained earnings pertain to equity in the company. Thus, the cash flow statement's primary purpose is to highlight income and spending, making that choice the clear correct answer.