Ingers' Net Asset Base

Why is the current year’s outflow of (68,750) not tacked onto year 1’s inflows of 39,540,437. I would think that, similar to the Schweser Live Mock IPS question, you have to carry forward all net inflows/outflows (plus investable assets) until you get to the year of retirement (which in this chart is end of year 1).

Is it simply because they poorly label the chart and “Current” is just an FYI column for last year’s inflows/outflows?

Volume 2 Page 176/177.

good question - I think I agree w/ you, it’s just last year’s and is not included for some reason

It is cashflow statement…the bottom line is net cashflow for the year…it is not cash balance…

cash balance calculated in the paragraph p177 42.3mil come from figures far above…

ok but it cant just disappear. if you have a net outflow of 68,750 in the current year, it has to be covered somehow.

my assumption is that it’s just not a very realistic CF statement, because they dont even show an asset base for the current year. otherwise, you would need to add current year inflows/outflows + current year net asset base to next year’s net cash inflows. again, an example of this can be seen in the schweser live mock.

i think they just essentially wanted to demonstrate year 2 outflows / year 1 asset base and got a little careless with the current year. anyone else agree?

it is not next year net cash inflow…it is next year openning cash balance (if you want to show it).

The statement only talks about cash,… the assets base include something else like bond, stocks…

I agree that the graph should add 1 more bottom line show the assets balance (if you want …to easily cal return)

i understand that is just a running balance of cash. i dont care about adding a line at the bottom. im just saying that the cash balance in the current year cant just disappear. so if you want to add all of your year 1 assets (bonds, investments, etc.) to your year 1 net cash inflow/outflow to obtain a year 1 net asset base, then you also need to add your current year net inflow/outflow, unless you have evidence that somehow the 68,750 was accounted for/paid off prior.

yep…the net negative CF can be paid by 1 mil cash in Peter’s asset on page 162, is it clear ?

that 1M in cash is part of your net asset base that is constructed for year 1.

so the -68,750 was not accounted for in the 1M. otherwise it would be less than 1M on pg 177.

again, maybe im just overthinking a problem that wasnt meant to be construed in this way, but i think in a literal sense the construction of the asset base is flawed unless we cant directly see what happened to those “current year” outflows after “current year”.

Now let say at the beginning of “current year” he has 1mil

current y net cashflow -68k

–> end of y cash balance : 932k

1y net +39ml

–> end 1y cash balance 39.932mil

exactly! this was my only point.

that the current inflows/outflows (which are -68,750 in this case) plus the current year asset base (let’s say 1,000,000) should be added to the year 1 net inflows/outflows.

that is what your math above shows.

but this wasnt done in the problem. they just took year 2 outflows / (year 1 asset base + yr 1 outflows). they shold have also added current year inflows/outflows + current year net asset base to the denominator.

again, they may have just forgot about current year because they are simply trying to illustrate a return calc for one year and didnt want to overconfuse.

oh yeahhh, I did not see the Exh5 before…however, they may assume the current assets (1 mil we used) is net of current year out flow (-68k)…

we also see they did not mention about the current year income from portfolio (at least generated form cash acc and fixed… asset)

so let assume that all income and out flows in current year taken out,…current port value is net :))

I just see in 2nd paragraph 4.1.1 they say …are being met by 500k…

I dont know…it is too long that i can not read all…