Question

Christopher just received his checking account statement from his bank. He has a NOW account with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance. His statement shows that he currently has a balance of $3,950. In looking at his statement he notices that his car payment check for $400 is still outstanding, and that his recently received payroll deposit of $3,600 had not posted at the time the statement was created. His normal living expenses average $1,500 per month including his car payment. Other than his car loan, he rarely writes any checks as he prefers to use his debit card and ATM card for day-to-day living expenses. He pays his credit card balance in full every month. Other than his checking account he does not own any investments. He has always dreamed of owning a house, and would like to buy one within the next five years. He has access to a 401(k) pension plan at work where his employer will match contributions up to 6% of his salary. He currently contributes 2% of his salary to this plan.
What recommendations would you give Christopher concerning his cash management?

a.Create a budget and set some savings goals.

b.Automate a savings plan using EFT.

c.Set up an account at a mutual fund company.

d.All of these are good recommendations.

e.All of these except Set up an account at a mutual fund company are good recommendations.

Answer 1

All but He should give up some liquidity are correct.

Explanation:

Cash management is the credit inflow and outflow management process. In the financial sector, both individuals and corporations have a lot of cash management factors and solutions. The cash flow statement for companies is a key element in the management of cash flow.

The following shall be included in general working capital:

Current assets: Money, receivable accounts for one year, stock

Current liabilities: All sales and marketing in respect of one year, short-term debt paid in respect of one year.