When we answering the essay question about liquidity in individual IPS, should we include the living expenses and salary in the answer?
I see the answer guide in Kaplan says if there is net cash inflow, we don’t need to include them. But if there is a net cash ouflow, we need to do so.
Is it correct?
If it’s a constraint, you should include it.
It takes a very short amount of time to write that liquidity requirements include satisfying the net cash outflow, so feels like little downside to including it?
One third party implied that incoming sums are liquidity also, but the test answers give a different answer. What is the truth?
If the incoming sums do not cover an outgoing sum, then it’s a liquidity constraint.
Why would the financial adviser care if the client might be getting money in the near future? But if he has an obligation, then it’s important to account for.
In my opinion, because it would affect his ability to take risk. Right?
If it is not a sizable amount of money, and it is not a source of income, then no.
On the other hand, any cash needs not covered by his ex-portfolio liquidity, needs to be addressed as a constraint.