Question

QUESTION 3

3.1 In order to enhance one’s wealth, one must maximize one’s cash inflows and minimize one’s cash outflows. In view of this:

3.1.1 Explain THREE (3) factors that influence a household’s cash inflows. (6)

3.1.2 Explain THREE (3) factors that influence a household’s cash outflows. (6)

3.2 Discuss FOUR (4) criteria that should be used to select a financial institution that would provide the best possible services for cash transactions and facilities.

Answer 1

3.1.1]

Three factors that influence a household's cash inflows are :

• Salary of earning members of the household
• Interest rate earned on savings
• Rate of return earned on investments

3.1.2]

;Three factors that influence a household's cash outflows are :

• General Living expenses
• Inflation rate
• Lifestyle

3.2]

Four criteria that should be used to select a financial institution :

• Rate of interest offered on deposits
• Charges for ATM / cash withdrawals
• Ease of doing online transactions - wire transfers, bill payments etc
• Other benefits offered such as lower interest rates on loan, lower premium on insurance, to existing customers