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  

Calculating, Assessing Monthly Cash Flow – Financial Ratios Gross Income                                            $7,000Income Taxes                                              1,400 Rent (home)                                                2,520Car payment                                                  430Student loan payment                                  150Credit card payment                                     400 Total Debt Payments                                 3,500 Retirement fund                                             0Cash emergency fund                                    0Giving/contributions                                      0 Entertainment                                               500Eating Out                                                     500Auto Insurance                                             100All Other Living Expense                          1,100 This individual reflects the following financial standing ratios: ($100) negative monthly net cash flow36% mortgage debt payment ratio50% total debt payment ratioNo current allocations for cash emergency fund, retirement, contributions Question: What does this indivudaul need to do to achieve a positive cash flow to be able save and invest for cash emergencies, retirement, giving/contributions?

Which of the 5C’s is the most important directly impacting all the other C’s, explaining why? Character (FICO) Capacity (Debt Ratios) Capital (Net Worth) Collateral (Pledged) Condtions (Job, Economy)  

The goal of a mutual fund growth fund is to achieve capital appreciation for long term investors, making it suitable for young investors with time on their side to weather the ups and downs of the market

Underline or highlight if these statements are true or false                                                                                                                                Alternative investments are high risk (true, false) Investing in commodities is speculative, risky, technical requring specialized knowledge (true, false) Money invested in alternatives is money you cannot afford to lose (true, false) Investing in gold is a hedge against geopolitical uncertainty and dollar devaluation (true, false) Gold bars/coins earn income similar to stocks paying a dividend (true, false) Investing in crypto is non-speculative and non-volatile (true, false) Crypto has the potential to become a significant global payment mechanism Crypto has the potential to become a world currency replacing the dollar Investing in crypto has no regulatory, cybersecurity, fraud, or insurance risk    

5C’s of Credit Underwriting Consumer Loans Instructions: evaluate the borrower profiles to approve or decline a loan request for buying a home Borrower Profile (1) Underwriting Factor 750 FICO 28% Home Debt Ratio 36% Total Debt Ratio High Net Worth 3 Mo. Cash Emergency Fund in Place Moderate Retirement Savings 20% Down Payment 80% Loan to Value Ratio Accountant 15 Years (H) Nurse 15 Year (W) Satisfactory Economic Conditions 2 Children saving for college Approve or Decline (Underline Your Answer)   Borrower Profile (2) Underwriting Factor 600 FICO 45% Home Debt Ratio 55% Total Debt Ratio Low Net Worth No Cash Emergency Fund in Place Low Retirement Savings 5% Down Payment 95% Loan to Value Ratio Accountant 3Years (H) Nurse 2 Year (W) Satisfactory Economic Conditions 1 Child not saving for college Approve or Decline (Underline Your Answer)   Borrower Profile (3) Underwriting Factor 700 FICO 32% Home Debt Ratio 40% Total Debt Ratio Moderate Net Worth 2 Mo. Cash Emergency Fund in Place Low Retirement Savings 20% Down Payment 80% Loan to Value Ratio Accountant 10 Years (H) Nurse 8 Years (W) Satisfactory Economic Conditions 3 Children limited college savings  Approve or Decline (Underline Your Answer)  

Adverse risk selection refers to the risk of a borrower applying for a loan knowing they are an undesirable credit risk

Patient Protection and Affordable Health Care Act aka Obamacare How do you feel about the Act:                                                                                                                               Yes     No Mostly support the Act Mostly do not support the Act (1) Explain/defend your position:  (2) Whether you  support or do not support the act, are there any provisions you like     

A cash advance is less costly than making a credit card purchase, and less indicative of cash flow issues

Over withholding of income taxes is a recommended way to save to get a windfall refund to spend on wants