Allison’s Net Cash Flow, Essay Example

To calculate Allison’s net cash flow, it is essential to calculate the amount of money she is spending in addition to the amount that she is earning. She is gaining $3000 for income after taxes, but must spend it on expenses that include rent, student loan payment, utilities, food, recreation, car expenses, and clothing. The total cost of her expenditures is $750 + $200 + $150 + $300 + $600 + $200 + $150, which comes to a total of $2,350. To determine the net cash flow, we must deduct the total amount of expenditures from the total cash inflow, which is $3,000 – $2,350. This yields a net cash flow of $650.

To calculate Judy’s net cash flow, we must deduct the total amount of expenditures from the total cash inflow. Judy’s total cash inflows were $3,000 for the month of June and her expenses were $4,000. Therefore, Judy’s net cash flow is -$1,000. Therefore, Judy must determine how to come up with the missing funds to ensure that she can make all of her payments. For Judy to be able to meet her financial obligations, she could either take money out of her investments, which is termed asset reduction, or borrow money, which will increase her liabilities.

It is important for individuals who wish to utilize credit cards to understand that doing so can have both positive and negative impacts on their personal budget, income statement, and balance sheet. While the degree of impact that credit cards will have varies from individual to individual, it is necessary to understand the related benefits and consequences of credit card use.

Credit cards allow individuals to purchase more things, which makes it necessary to track a greater amount of items on the balance sheet. Thus, doing so can impact an individual’s personal budget by preventing the ability to keep track of purchases and expenses. If the individual also uses cash as a means to purchase goods and services, then he or she will need to either keep receipts or record the amount of each purchase. To keep track of the personal budget, the individual will then need to add together the funds spend using both cash and credit, and then subtracting this value from the total cash inflow for the month. Credit transactions are regularly recorded and provided to the customer, so this will be a less difficult aspect of the personal budget to track. This could be advantageous to customers who wish to spend money in advance of their cash inflow and will have enough money to pay for the items the following month. This is disadvantageous for those who create expenses that are greater than their cash inflow.

Credit cards can impact the income statement for a reason similar to why it impacts the personal budget. Credit card usage will influence how the income statement appears over time. If a credit card is used to frequently, the cash inflow will be less than the expenses, which will demonstrate a net decrease in profit over time. On the other hand, an individual who uses the card frequently but has a cash inflow that is greater than expenses will continue to see an increase in net profit over time. It is important, therefore, for all credit card users to ensure that the use will contribute to their ability to have money remaining in their bank accounts. This can be done if the money is tracked properly.

Since the balance sheet is tracked by using the formula “Assets = Liabilities + Shareholders’ Equity”, credit card debt can be considered to be a liability. It is important for individuals and companies to therefore keep track of their credit card debt to ensure that their income is greater than the debt, and does not come as a surprise when the credit card bill should be paid. Ultimately, purchases on credit allow people to purchase more assets. In this sense, credit cards could either be an advantage or disadvantage as well.

Making the decision to sell your own home could have both advantages and disadvantages. This can relate both to the profitability and ease of which the home could be sold. Many of the advantages of avoiding the use of a relator relates to the total profit that will be gained by the homeowner as a result. The biggest advantage of selling one’s own home, therefore, is that no commission from the sale will be paid to the realtor. Since many realtor’s work on commission, this will reduce a large portion of the funds that will be spent in an attempt to sell a home. This will either result in a greater amount of overall profit, or the ability of the seller to invest more money into the home before the sale to have it sell for a higher price. An additional advantage is that individuals that sell their own home will be able to have complete control over the business transaction, meaning they are able to discuss the terms of the purchase directly with interested buyers. This could result in price flexibility and negotiations that a relator would not want to engage in. Therefore, the seller has more control over every aspect of their sale. Additional advantages that are related to this is that the seller can schedule their own appointments to meet potential buyers and that if equity is low, the seller can sell their home without having to write a check.

The biggest disadvantage of selling one’s own home is that it is a very time consuming process. Therefore, the seller has to consider whether the time invested into this process is worth the additional profit that will be gained. Second, sellers need to market and advertise their home that is on the market. Without doing so, they will not gain the attention they need to be able to make the sale. If this is not done correctly, it can be a very expensive process that may again detract from profit. Additional disadvantages include the profit that could be lost if the seller is not properly aware of the housing market, which would involve failing to price the house correctly, meaning it will not be able to compete with similar homes that are priced well. Otherwise, it may be priced to low and profit will be lost. Failing to understand the market can also result in the buyer paying unnecessary fees in the process of selling the home. Ultimately, it is more advantageous for some to use a realtor because of their knowledge of the field and their ability to find their clients a good profit.