Reference no: EM133633252
Bao and Mary Jane Lee have a yearly income of $93,842 and own a house worth $127,900, two cars worth a total of $28,195, and furniture worth $14,085. The house has a mortgage of $85,677, and they have a car loan with an outstanding balance of $5,822. Utility bills, totaling $181 for this month, have not been paid. Calculate their net worth, and explain what it means.
Using the preceding information, calculate the debt ratio for the Lee household.
Ed and Marta are paid $2,410 after taxes every month. Monthly expenses include $777 on housing and utilities, $395 for auto loans, $164 on food, and an average of $713 on clothing and other variable expenses. Assuming that they save excess funds, calculate and interpret their savings ratio. Hint: Prepare an income statement, and then compute the ratio.
A rumor about "right sizing" at Ojai's engineering firm has him and his wife, Kaya, concerned about their preparation for meeting financial emergencies. Help them calculate their net worth, and calculate and interpret the current ratio, given the following assets and liabilities:
The utility and credit card bills are due this month, while the auto loan will be paid off over the next several years.
5.Faith Brooks, a 28-year-old college graduate, never took a personal finance class. She pays her bills on time, has managed to save a little in a mutual fund, and (with the help of an inheritance) has managed a down payment on a condominium. But Faith worries about her financial situation. Using the following information, prepare a personal income statement (for the year) and balance sheet for Faith. Calculate her current ratio, savings ratio, month's living expenses covered ratio, debt ratio, and long-term debt coverage ratio. Interpret these financial statements and ratios for Faith. Based on your assessment, what advice would you give Faith? In addition to the following list, Faith offers these explanations:
- All short-term and long-term liabilities are unpaid.
- "Other expenses, monthly" represents cash spent without a record.
- She charges all incidentals on her credit cards and pays the balances off monthly. The balances shown represent her average monthly balances.
6. Your friend Dario heard about your personal finance class and asked for your help. Explain to Dario why he should establish a budget and what information he needs.
7. Dario, from the previous question, is having a hard time sticking to a budget. Explain why this might be the case, and identify strategies he can use to overcome his difficulties.
8. If the Potinsky household spends $39,000 annually on all living expenses and long-term debt, calculate the amount recommended for an emergency fund. How might household circumstances (e.g., number of wage earners in the household, available credit, and type and stability of employment) affect this decision?
9. Based on your projected salary (see information in Chapter 1 about estimating your salary through the U.S. Bureau of Labor Statistics' website: estimate and subtract 20 percent for taxes and benefits and another 10 percent for retirement. From the remainder, estimate and subtract the amount you plan to save annually for short-, intermediate-, and long-term goals. What you have left represents your income available for meeting all expenses. Now estimate the emergency fund you need to cover 3 to 6 months' expenses. Realistically, how long will it take you to save the needed amount?