Question

Cash flows   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:

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. ​(Click on the icon located on the​ top-right corner of the data table in order to copy its contents into a​ spreadsheet.)

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?

Item	Cash inflow		Cash outflow
Clothes			​$1,400
Interest received	​$440
Dining out			​$530
Groceries			​$760
Salary	​$4,300
Auto payment			​$338
Utilities			​$280
Mortgage			​$1,260
Gas			​$237

Answer 1

a.

Total cash inflow

440+4300

Total cash inflow

$4,740

Total cash outflow

1400+530+760+338+280+1260+237

Total cash outflow

$4,805

b.

Net cash flow

Cash inflow - Cash outflow

Net cash flow

4740-4805

Net cash flow

-$65

c.

With shortage Jane should try to reduce her cash outflow or use credit card or loan to clear the shortage.

d.

If there was surplus, investment strategy would be to invest in short term investment which provides 5% return or if amount was not sufficient the surplus could be kept at savings account