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 per year while it offers​ short-term investment rates of . ​ Jane's cash flows during August were as​ follows: LOADING.... 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 ​$ 4940 4940. ​(Round to the nearest​ dollar.)

Answer 1

To analyze Jane's financial situation based on cash flows, her total cash outflows must be calculated to determine the net cash flow. Options for managing a shortage include reducing expenses or getting a loan, and for a surplus, saving or investing wisely. Understanding liquidity's role aids in optimizing cash management.

Step-by-step explanation:

Cash Flows Analysis

Regarding Jane's financial planning through cash flows, it is essential to consider both her cash inflows and outflows over a specific period. For August, we know Jane's total cash inflows amount to $4,940. The first step in the analysis would be to calculate her total cash outflows, though the exact figures have not been provided in the question. Once we have both inflows and outflows, we can determine the net cash flow by subtracting the outflows from the inflows.

If Jane experiences a cash shortage, she has several options, such as cutting back on expenses, securing a short-term loan from her bank, or possibly utilizing a credit card for necessary expenditures. On the other hand, if she has a cash surplus, a prudent strategy would include increasing her savings, considering short-term investments offered by her bank, or paying off any outstanding debts to reduce interest costs.

Liquidity is a crucial concept in this context, indicating how quickly Jane can convert her financial assets into cash for use. Banks and financial institutions offer different products and services that cater to both liquidity needs and long-term financial planning, from checking and savings accounts to loans and investments.

It is also advisable for Jane to maintain a cushion of savings to cover at least three months of expenses for emergencies, suggesting a practice of tracking cash flows regularly and maintaining financial discipline.

Answer 2

A.

TOTAL CASH INFLOW $4,950

TOTAL CASH OUTFLOW $4,357

B. $593

C. First is for Jane to bring down her outflow

Secondly is for Jane to either make use of a credit card or request for loan.

D. Jane should make use of the short-term investment rates of 5 percent which was offered by the bank and secondly in a situation where she think or felt that the surplus cannot be enough for her to invest with Jane should go ahead and save the money.

Step-by-step explanation:

a. Calculation to Determine Jane’s total cash inflows and cash outflows

TOTAL CASH INFLOW

Interest received $ 450

Salary4,500

TOTAL CASH INFLOW $4,950

TOTAL CASH OUTFLOW

Clothes-$1,000

Dining out-500

Groceries-800

Auto payment-355

Utilities-280

Mortgage-1,200

Gas-222

TOTAL CASH OUTFLOW $4,357

Therefore total cash inflow will be $4, 950 while total cash Outflow will be $4,357

b. Calculation to Determine the net cash flowfor the month of August using this formula

The Net cash flow =Total cash inflow - Total cash outflow

Let plug in the formula

Net cash flow =$4,950-$4,357

Net cash flow = $593

Therefore the Net cash flow will be $593

c. In a situation where there is a​ shortage, the few options that will be open to​ Jane will be:

First is for Jane to bring down her outflow

Second is for Jane to either make use of a credit card or request for loan.

d. In a situation where there is a​ surplus, what should be a prudent strategy for Jane is to​ follow:

Jane should make use of the short-term investment rates of 5 percent which was offered by the bank and secondly in a situation where she think or felt that the surplus cannot be enough for her to invest with Jane should go ahead and save the money.