In: Finance
Vaughn has a net worth of $2,500. If Vaughn has a total of $2,000 of liquid assets, $4,000 of personal possessions, and student loans totaling $2,500, how much does she owe on her credit card bills? Assume that Vaughn has no other assets or liabilities.
The Schaeffer family wants to increase their savings ratio next year. Their current savings ratio is 5%. If the family makes a combined income of $60,000, and they want their savings ratio to be 10% next year, how much are they planning to save (in dollars)?
Nathan has a car loan of $4,000, a mortgage balance of $90,000 and student loans of $5,000. If Nathan's debt ratio is 40%, what is Nathan's net worth?
The Fountain family has current liabilities of $5,000 and a current ratio of 1.5. What are their liquid assets?
Ryan has monthly expenses of $5,000 and a liquidity ratio of 2.2. What are Ryan's liquid assets?
Chip has credit payments of $5,000 per month and has a debt-payments ratio of .8. How much does Chip have in take-home pay each month?
The formula of Net worth is as below:
Net worth = Total assets - Total liabilities
Total assets = $2,000 + $4,000 = $6,000
Total liabilities = $2,500 + Credit card bill
Net worth = $2,500
$2,500 = $6,000 - ($2,500 + credit card bill)
$2,500 = $6,000 - $2,500 - credit card bill
Credit card bill = $6,000 - $2,500 - $2,500 = $1,000
So, credit card bill is $1,000.
Schaeffer Family are planning to save $6,000 calculated as below:
Savings ratio = Savings/total income
10% = Savings/$60,000
Savings = $60,000*10% = $6,000
Nathan's debt ratio is 40%. the formula of debt ratio is as below:
debt ratio = total liabilities/total assets
Total liabilities = $4,000 + $90,000 + $5,000 = $99,000
40% = $99,000/Total assets
Total assets = $99,000/40% = $247,500
Net worth = Total assets - Total liabilities
Nathan's net worth = $247,500 - $99,000 = $148,500
Fountain family's liquid assets can be calculated as below using formula of current ratio:
Current ratio = current assets/current liabilities
1.5 = current Assets/$5,000
Current assets = $5,000*1.5 = $7,500
There is a difference between current assets and liquid assets. Current assets include cash and bank balance, debtors, short-term investments, bills receivable, inventory and prepaid expenses whereas liquid assets is current assets - inventory - prepaid expenses.
In the question inventory and prepaid expenses are not given. So, we assume Fountain family's current assets are their liquid assets which is $7,500.
Ryan's liquid assets are calculated as below:
liquid ratio = liquid assets/current liabilities
2.2 = liquid assets/$5,000
Ryan's liquid assets = $5,000*2.2 = $11,000
Chip have in take-home pay each month of $6,250 calculated as below:
debt-payments ratio = monthly debt payments/gross monthly income
0.8 = $5,000/gross monthly income
gross monthly income = $5,000/0.8 = $6,250