Calculating, Assessing Financial Standing Ratios Calculate t…
Calculating, Assessing Financial Standing Ratios Calculate the financial standing ratios using the following information: Total Assets $ 1,500,000 Total Liabilities $ 1,200,000 Cash/Savings (included in total assets) $ 16,000 Gross Income $ 15,000 Income Taxes $ 3,000 Living Expenses $ 4,000 Debt Payments: Home $ 7,500 ($1,000,000 loan) Credit Card $ 700 ($60,000 balance) Car $ 800 ($75,000 loan) Total Debt Payments $ 9,000 Monthly savings $ 300 Budget Not currently budgeting Financial Ratio Your Answer Calculation Net Worth Total assets minus total liabilities Guideline = positive net worth; evaluate size, debt, liquidity Net Cash Flow (NCF) Gross Income minus taxes, living expenses, debt payments = NCF Guideline = positive net cash flow for allocation to prioritized goals Liquidity Ratio months Cash/savings divided by monthly expenses and debt payments Guideline = 6 months coverage Mortgage Debt Service Ratio % Housing payment divided by monthly gross income Guideline = no > 28% debt ratio Debt Service Payment Ratio % Monthly total debt payments divided by monthly gross income Guideline: no > 36% debt ratio Savings Ratio % Monthly savings divided by monthly gross income Guideline 15% Which FSR’s need improvement: Yes No Net Worth/Liquidity Net Cash Flow Liquidity Ratio Mortgage Ratio Total Debt Ratio Savings Ratio