A personal cash flow statement is usually the starting point for an individual's or family's budget....

A personal cash flow statement is usually the starting point for an individual's or family's budget. Select one: True False

Expert Solution

The answer is True.

A personal cash flow statement measures your cash inflows and outflows in order to show you your net cash flow for a specific period of time. Cash inflows generally include the following:

Salaries
Interest from savings accounts
Dividends from investments
Capital gains from the sale of financial securities like stocks and bonds

Cash inflow can also include money received from the sale of assets like houses or cars. Essentially, your cash inflow consists of anything that brings in money.

Cash outflow represents all expenses, regardless of size. Cash outflows include the following types of costs:

Rent or mortgage payments
Utility bills
Groceries
Gas
Entertainment (books, movie tickets, restaurant meals, etc.)

The purpose of determining your cash inflows and outflows is to find your net cash flow. Your net cash flow is simply the result of subtracting your outflow from your inflow. A positive net cash flow means that you earned more than you spent and that you have some money left over from that period. On the other hand, a negative net cash flow shows that you spent more money than you brought in.

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