Reference no: EM133344973

Question: Frank and Elaine Barker are married, in their early forties, and have two 10 year old twins. Frank works as an IT administrator and earns $70,000 each year. Elaine is a project manager with a software company and earns $76,000 each year. They own their own home that they purchased 10 years ago. They have worked hard to spend within their means and not take on any unnecessary debt. They are meeting with you today to discuss their current financial situation and a savings strategy for their children's education and for their retirement. The Barker's find themselves in a position now where they have additional cash flow and they want your help to determine the best strategies.

They have provided you with their financial information and their financial statements and ratios have been prepared below:

 

Net Worth Statement Frank & Elaine Year Ending 20XX Assets: Chequing Account Emergency Fund - TFSA Cars Personal Possessions House Total Assets   $4,000 $10,000 $32,000 $25,000 $825,000 $896,000 Liabilities: Car Loan Mortgage Total Liabilities   $14,000 $435,000 $449,000 Net Worth: $457,000   Financial Ratio  Value Emergency Fund Ratio  1.68 Debt Ratio  0.98 Debt Payment Ratio 0.042 Savings Ratio 0

Cash Flow Statement Frank & Elaine Year Ending 20XX Cash Inflows: Gross Income Deductions (CPP, EI, Taxes) Net Income (Take home pay)   $151,000 $38,000 $113,000 Cash Outflows: Mortgage Payment Property tax Children's Activities Heat Other Utilities Home insurance Auto insurance & Maintenance Gasoline Food Entertainment Clothing Other expenses/Vacation Car loan payment Miscellaneous Expenses Total Expenses   $38,652 $7,700 $5,000 $3,400 $3,600 $1,900 $2,500 $3,600 $7,600 $6,000 $3,400 $6,000 $4,800 $6,000 $100,152 Surplus $12,848

Requirements:

a) Analyze and explain to the Barker's their current financial situation by commenting on their financial statements and ratios.

b) What three recommendations would you make to the Barker's to most improve their current financial well-being and work towards their goals? Explain the benefits and drawbacks of each recommendation.