Question

It is typical for Jane to​ plan, monitor, and assess her financial position using cash flows over a given​ period, typically a month. Jane has a savings account and her bank loans money at 6 % per year while it offers​ short-term investment rates of 5 %.

​ Jane's cash flows during August were as​ follows:

Clothes  $1,200
Interest received $450
Dining out  $460
Groceries  $820
Salary $4,600
Auto payment  $357
Utilities  $270
Mortgage  $1,140
Gas  $234

a.  Determine​ Jane's total cash inflows and cash outflows.

b.  Determine the net cash flow for the month of August.

c.  If there is a​ shortage, what are a few options open to​ Jane?

d.  If there is a​ surplus, what would be a prudent strategy for her to​ follow?

a. ​ Jane's total cash inflows are $ ? . ​(Round to the nearest​ dollar.)

Answer 1

a) Jane's total cashflow are:

Total cash inflow = interest received + salary

=$450 + $4,600 = $5,050

Total cash outflows are= $1,200+$460+$820+$357+$270+$1,140+$234

= $4,481

b) Net cash flow for the month of august:

Net cash flow= cash inflow - cash outflow

= $5,050 - $4,481

= $569

c)If there is shortage, options available for Jane are:

Jane can borrow money from bank or withdraw money from an existing saving/ investing account. Another alternative is to cut down on any necessary expenses.

d)If there is surplus, a prudent strategy for her to follow is:

Jane can use her monthly surplus to open a savings / investing account or increase the balance on an existing account. Alternatively, she could reduce debt by paying more for some obligations like her loan, credit cards, or mortgage. In order to maintain her monthly surplus she should maintain her current level of expenses.