The Anderson family wants to look at their cash flow over a year. They decide to write out their cash flow for 4 months as given in the spreadsheet below. In which of the months did they have the greatest net cash flow?
| | A | B | C | D | E |
| :---------- | :---------------- | :------- | :------ | :------- | :------- |
| 1 | | January | April | August | December |
| 2 | Cash Inflows | | | | |
| 3 | Disposable income | $2,760 | $3,060 | $2,760 | $2,900 |
| 4 | Interest on deposits | | | | |
| 5 | Income from investments | $0 | $0 | $0 | $0 |
| 6 | Total Cash Inflow | $2,760 | $3,060 | $2,760 | $2,900 |
| 7 | | | | | |
| 8 | Cash outflows | | | | |
| 9 | Mortgage | $1,020 | $1,020 | $1,020 | $1,020 |
| 10 | Electric | $230 | $185 | $115 | $205 |
| 11 | Water | $85 | $80 | $100 | $90 |
| 12 | Cable and telephone | $115 | $115 | $115 | $115 |
| 13 | Groceries | $600 | $540 | $585 | $710 |
| 14 | Recreation | $150 | $150 | $500 | $75 |
| 15 | Insurance | $185 | $185 | $185 | $185 |
Answer (2)
Calculate the total cash outflow for each month.
Calculate the net cash flow for each month by subtracting total outflows from total inflows.
Compare the net cash flows of the four months.
Identify that April has the greatest net cash flow: A p r i l .
Explanation
Understanding the Problem We are given the cash inflows and outflows for the Anderson family for the months of January, April, August, and December. We need to calculate the net cash flow for each month and determine which month has the greatest net cash flow. The net cash flow is calculated by subtracting the total cash outflows from the total cash inflows.
Calculating Total Cash Outflows First, let's calculate the total cash outflows for each month:
January: Mortgage + Electric + Water + Cable and telephone + Groceries + Recreation + Insurance January: $1020 + $230 + $85 + $115 + $600 + $150 + $185 = $2385
April: Mortgage + Electric + Water + Cable and telephone + Groceries + Recreation + Insurance April: $1020 + $185 + $80 + $115 + $540 + $150 + $185 = $2275
August: Mortgage + Electric + Water + Cable and telephone + Groceries + Recreation + Insurance August: $1020 + $115 + $100 + $115 + $585 + $500 + $185 = $2620
December: Mortgage + Electric + Water + Cable and telephone + Groceries + Recreation + Insurance December: $1020 + $205 + $90 + $115 + $710 + $75 + $185 = $2400
Calculating Net Cash Flows Now, let's calculate the net cash flow for each month by subtracting the total cash outflow from the total cash inflow:
January: Total Cash Inflow - Total Cash Outflow January: $2760 - $2385 = $375 April: Total Cash Inflow - Total Cash Outflow April: $3060 - $2275 = $785
August: Total Cash Inflow - Total Cash Outflow August: $2760 - $2620 = $140 December: Total Cash Inflow - Total Cash Outflow December: $2900 - $2400 = $500
Comparing Net Cash Flows and Finding the Greatest Finally, let's compare the net cash flows for each month:
January: $375 April: $785 August: $140 December: $500
Comparing these values, we see that April has the greatest net cash flow.
Final Answer Therefore, the Anderson family had the greatest net cash flow in April.
Examples
Understanding cash flow is essential for managing personal finances. For example, by tracking income and expenses, you can identify areas where you can save money and make informed decisions about spending. This analysis helps in creating a budget, setting financial goals, and achieving financial stability. By analyzing their cash flow, the Anderson family can make informed decisions about their spending and saving habits, leading to better financial planning and security.
The Anderson family had the greatest net cash flow in April, totaling $785. This was determined by calculating the cash inflows and outflows for each month and subtracting outflows from inflows. April had the highest net cash flow among the four months analyzed.
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