Which of the following represents a consideration when preparing consolidated statements of cash flows?

When preparing consolidated statements of cash flows, it is important to eliminate transactions between the parent company and its subsidiaries. This is because including intercompany transactions would distort the financial information presented in the consolidated cash flow statement. For instance, if the parent company sells goods to a subsidiary, both the sale and the corresponding purchase would be recognized in their individual cash flows. However, at the consolidated level, these transactions cancel each other out and do not involve cash inflow or outflow from an external perspective. Therefore, to accurately reflect the cash operations of the consolidated entity as a whole, intercompany cash flows must be eliminated, allowing for a true representation of the cash movements driven by external activities only.

In contrasting options, excluding all subsidiary activities would ignore the impacts of operations that can considerably influence the consolidated cash flow picture. Including all cash flows from affiliates could suggest a broader inclusion of entities that are not controlled by the parent, thus misrepresenting the financial relationship intended for consolidation. Counting only external cash flows would omit significant internal cash flows that do not require adjustment but are necessary for understanding the company's overall liquidity and cash management due to the inherent relationships in a corporate structure.