Bill and Ann have the following liabilities: Mortgage ...................................... $43 500 Car loan .............................................. 2 750 Credit
Question:
Bill and Ann have the following liabilities:
Mortgage ...................................... $43 500
Car loan .............................................. 2 750
Credit card balance ........................... 165
Student loans ................................ 15 000
Furniture loan (6 months) ........... 1 200
a. What are their current liabilities? What are their longterm liabilities? What is their net worth?
b. Bill and Ann would like to trade in one of their cars, which has a fair market value of $7000, for a new one with a fair market value of $21 500. The dealer will take their car and provide a $14 500 loan for the new car. If they make this deal, what will be the effect on their net worth?
c. What is Bill and Ann’s current ratio? What is their debt-to-asset ratio? Comment on each ratio.
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