Question

Carol works as a business representative for an import/export company. Her job provides her with the opportunity to travel and experience new things. Because she travels so much, Carol feels that she does not have a handle on her finances. She has decided to pay a visit to a financial advisor for help. Following. are her assets, liabilities, and items of cash inflow and outflow: All items are monthly unless otherwise indicated Carol's Salary Home Cost/Value Gas/Heating Electric Water Internet/Cable Landline Phone Usage Cell Phone Usage Food Mortgage Payment Car Insurance Savings Balance Checking Balance. Lawn Service Microsoft® Excel spreadsheet with Three (3) Sheets: $2,000 $100,000 $100 $125 $60 $150 $50 $200 $250 $796 $165 $500 $1,000 $100 Auto Payment MasterCard Balance Visa Card Balance Bloomingdale Card Balance Personal Loan Balance Mortgage Balance Car Cost/Value Gym Membership Personal Loan Payment Carol's 401K Balance/Value Auto Loan Balance Visa Payment Bloomingdale Payment MasterCard Payment $262 $5,000 $3,000 $1,500 Int 29% $5,000 Int 5%, 60 mths Int 15% Int 15% $95,000 $20,000 • Organize cash outflows by Debt Payments and Expenses, with subtotals for each. $20 $20 201 $94 $50,000 $15,000 • Create the following financial analyses using the information provided for Carol (Hint: first identify each item as an Asset, Liability,Cash Inflow or Cash Outflow): . • Sheet 1. a Balance Sheet, including a line item showing Carol's overall Net Worth. • Sheet 2. a Cash Flow Statement, for a single month, including a line item showing Carol's overall Net Cash Flow. Sheet 3. Write a concise (1 paragraph each) response that addresses each the following items: . • Compile a list of legal protections that can be used to protect Carol's assets. $60 $30 $100 • Format these 2 sheets professionally and consistently. Use appropriate Sheet Tab Titles. APA formatting is NOT required. • Apply financial planning concepts to advise Carol and explain how Carol can benefit from financial planning. Describe the benefits of using financial statements in financial planning. • Explain strategies that Carol can use to increase her net worth. How does this affect her cash flow? ​

Answer 1

Safeguarding assets through legal measures, embracing financial planning concepts, and implementing strategic approaches like debt repayment and investing can enhance net worth, positively impacting cash flow and overall financial stability.

Sheet 1: Balance Sheet

| Assets | Amount |

|---------------------------|---------|

| Checking Balance | $796 |

| Savings Balance | $1,000 |

| 401K Balance/Value | $5,000 |

| Home Cost/Value | $100,000|

| Car Cost/Value | $20,000 |

| | |

| Total Assets | $126,796|

| | |

| Liabilities | Amount |

| Mortgage Balance | $95,000 |

| Auto Loan Balance | $20,000 |

| Personal Loan Balance | $5,000 |

| MasterCard Balance | $3,000 |

| Visa Card Balance | $1,500 |

| | |

| Total Liabilities | $124,500|

| | |

| Net Worth | $2,296 |

Sheet 2: Cash Flow Statement

| Cash Inflows | Amount |

|---------------------------|---------|

| Salary | $2,000 |

| | |

| Total Cash Inflows | $2,000 |

| | |

| Cash Outflows - Expenses | Amount |

| Gas/Heating | $100 |

| Electric | $125 |

| Water | $60 |

| Internet/Cable | $150 |

| Landline Phone Usage | $50 |

| Cell Phone Usage | $200 |

| Food | $250 |

| Mortgage Payment | $796 |

| Car Insurance | $165 |

| Auto Payment | $262 |

| Gym Membership | $20 |

| Personal Loan Payment | $201 |

| | |

| Total Expenses | $2,369 |

| | |

| Net Cash Flow | -$369 |

Sheet 3: Financial Planning Analysis

Carol should consider the following legal protections to safeguard her assets:

1. Insurance Policies: Ensure her home, car, and life insurance are comprehensive and up to date.

2. Estate Planning: Establish a will and, if necessary, set up a trust to protect assets.

3. Limited Liability Company (LLC): If applicable, consider forming an LLC for added protection.

Financial Planning Concepts:

Emergency Fund: Build a robust emergency fund to cover unexpected expenses.

Debt Management: Prioritize paying off high-interest debts to improve financial health.

Benefits of Financial Statements in Financial Planning:

Visibility: Statements provide a clear snapshot of Carol's financial health.

Decision Making: Informed decisions can be made based on income, expenses, and net worth.

Strategies to Increase Net Worth:

1. Debt Repayment: Allocate extra funds to pay off high-interest debts.

2. Investing: Consider investing part of the savings to potentially increase wealth.

3. Budgeting: Track and reduce unnecessary expenses to increase savings.

Increasing net worth positively affects cash flow by reducing interest payments and increasing available funds for saving and investing.