Question

Question 10 The Stadlers are a middle-class family living comfortably in a single-family home in a suburb of Vancouver. Mr. and Mrs. Stadler earn a decent family income, bringing home almost $65,000 after taxes and other deductions. They have two active school-age children. The Stadlers have come to you to assess their family's financial situation. As a starting point you decide to look at their cash flow for 2017 You organize the information they provided you into the traditional cash flow statement format shown below Stadler Family Cash Flow Statement for 2017 Cash from operations Cash received in salaries Cash spent on household activities Cash spent on vacations Cash spent on children and their activities 564 275 (48,750) (3,200) (15,900) 13,575 Financing activities Payments on mortgage (including interest) Bank loan Second mortgage Borrowing from parents 19,650) 15,000 12,500 5.000 22,850 Investing activities Home renovations New car Savings (4,825) (16,750) (500) 122,075) Increase in cash during the year Cash at the beginning of the year Cash at the end of the year Required: Prepare a report analyzing the Stadler's cash flow statement. How do you think the Stadlers are doing? Do you have any suggestions about any changes they could make? What other information would help you analyze the situation more thoroughly?

Answer 1

Answer This report will assess your current situation and provide suggestions for empi If we look at the information provided by stadlers at cash from operations, there is a negative balance of $3575 which is a bit of a cause for concern. this means that you Spend more cash in your day to day activities than cash you get from your jobs. Typically, this is an area you want to be positive positive cash cash flow from operations means your living within your means, Saving some money for non- day to day purposes. Negative Cath from operations means you need to get cash from other sources to make ends meet. Turning to your financing activities, you had an overall cash inflow of $22850. this came from loans from the bank borrowings from parents, and a second mortagage taleen out you are relying heavily on borrowings to survive.

Unfortunately, there a limits to borrowing. At Some point borrowers will not lend to you you will be too risky), the cost of borrowing will increase (1) (as your debt load increases lenders will want to charge a higher interest rate to compensate for the increased risk), and celtimately you will be unable to pay for the cost of your borrowing. Finally, your investing activities had a net cash out flow of $22075 and this amount is almost equivalent to the cash- Enflow from financing activities. your investing activities included the purchase of car (which a assumed it what the bank loan was for), renovations made to your home, and $500 put to Savings. As a whole, you saw your cash balance decline $2800 leaving you with only $490 cash on hand. This is not a lot. If you lose your sob have alosolutely no reserve you have ongoing obligations that includes your

mortgage payments, Interest payments on your bank loan, and payments on the second mortgage. you need to take drastic steps to right your family's financial situation. Frost, you need a budget. In building the budget you need to examine your expe- nditure to find places to Cut (011 reduce. Experts says you should be saving to % of your paycheque, which you are not doing. you want to make sure you have a plan to cover your short-term obligations as this can create a lot of anxiety if you cannot - cover your current liabilities (ies, mortgage payments, bank loan ekey)you should look to reducing your debt load by channelling cash Savings that you find to the most costly loans. Thank you for the apportunity to prepare this report,