How can you test if the model's cash balances are non-negative across all years?

• A. Implement checks that cash balance >= 0; flag and adjust sources or uses if negative.
• B. Assume negative cash is acceptable.
• C. Only test at the end.
• D. Cash balance is always positive by design.

Answer: (A)

The main idea is to ensure the forecast is financially feasible by enforcing a non-negativity constraint on cash in every year. In a typical real estate pro forma, ending cash for each year should come from starting cash plus cash inflows and minus cash outflows, with a requirement that cash never goes negative. To test this, we implement checks that cash balance is >= 0 for each year. If a year would produce a negative balance, the model flags it and guides adjustments to keep it non-negative—such as raising additional funding, re-timing sources or uses, delaying expenditures, or tightening operating assumptions. This approach catches timing gaps and ensures the plan is practical, rather than letting a shortfall go unnoticed until the end.

Why the other ideas don’t fit: assuming negative cash is acceptable ignores real liquidity constraints; testing only at the end misses early-year shortfalls and timing issues; and assuming cash balance is always positive by design is not safe because many realistic cash flows involve staged capital outlays and financing that can temporarily create negative balances if not constrained.