Question

In: Finance

assignments for the corresponding assignment. Use the following balance sheet and cash flow information to determine...

assignments for the corresponding assignment.

Use the following balance sheet and cash flow information to determine the net worth and net surplus for an individual in a recent month:

Liquid Assets $15,000

Home Value $220,000

Investment assets: $120,000

Personal Property $30,000

Total assets: $385,000

Short Term Debt: $7000 ($250 a month)

Monthly Mortgage Payment $1400 on a $180,000 mortgage

Total Debt: $187,000

Monthly Gross Income: $11,000

Monthly Disposable Income $ 4000

Monthly Expenses: $7000

Now that the individual in question 1 has a better understanding of their situation, let’s analyze further. Given the balance sheet and cash-flow statement information in question 1, calculate the following ratios see page 87:

Liquidity Ratio

Asset-to-Debt Ratio

Debt-to-Income Ratio

Debt payments-to-disposable income ratio

Investment assets-to-total assets ratio

Expert Solution

Q.1

1.Networth: It is the difference of Total assets and Total liabilities

= 385000 - 187000

= 198000

2.Net surplus :it is the difference of Monthly gross income and expenses

= 11000 - 7000

= 4000

Q.2

1.Liquidity Ratio = it is the ratio to determine how quick the organisation converts its current assets into cash so that it can pay off its liability on a timely basis.

Liquid ratio = Current assets/ current liabilities

= 15000/7000 = 2.143

2.Asset to Debt ratio = It is the indicator for determining the percentage of company's total assets that were financed

= Total liabilities / Total Assets

= 187000/385000

= 0.4857

3. Debt to Income ratio = It is monthly debt payments divided by gross monthly income

= (250+1400)/11000

= 1650/11000 =0.15

4. Debt payments to disposable income ratio = it is the ratio for the monthly debt payments to monthly disposable income

= 1650/4000 = 0.4125

5.Investment assets to total assets ratio = It is the ratio for the investment assets to total assets of the company

= 125000/385000

= 0.31168

jeff jeffy answered 5 months ago

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