Which is true regarding cash flow statements?

Cash flow statements are integral to understanding the financial health of a business as they provide insight into how money moves in and out of a company over a defined period. This means they do not just focus on income sources but rather track all cash inflows and outflows, including cash from operating, investing, and financing activities.

The correct answer emphasizes that cash flow statements reflect transaction activity over a specified period, which is crucial for managers, investors, and stakeholders to assess the company's liquidity and operational efficiency. This specific time frame allows for insights into seasonal variations and other temporal factors affecting cash flow.

The other options misinterpret the function of cash flow statements. They do not exclusively track income sources, nor do they only summarize financial activity at year-end; instead, they provide a continuous overview for any chosen period, whether it's monthly, quarterly, or annually. Additionally, they do not focus solely on unrealized gains and losses; rather, they cover actual cash transactions, making the statement a vital tool for practical financial analysis.