For this assignment, assume that you were discussing what you learned in this module with a...
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For this assignment, assume that you were discussing what you learned in this module with a friend, and they were so impressed with your knowledge that they asked you to help to evaluate their personal financial position. They completed their own Balance Sheet and Income and Expense Statement with another friend and provided key information as follows (in alphabetical order): Category Amount Annual After-Tax Income $52,500 Cash Surplus $7,200 Monthly Gross (Before- $6,200 Tax) Income Net Worth $30,000 Total Assets $165,000 Total Current Debts $11,800 Total Liquid Assets $18,500 Total Monthly Loan Payments $850 Respond to the following using the above information 1. Describe the components of personal financial statements and their role in the financial planning process by addressing the following: a. Balance Sheet: i. Describe the purpose of this statement along with its three components in the order in which they appear in this report. ii. For the first two components, provide two examples of the categories that would be reported. iii. Finally, indicate if the information presented is in the form of actual or estimated amounts. b. Income and Expense Statement: i. Describe the purpose of this statement along with its three components in the order in which they appear in this report. ii. For the first two components, provide two examples of the categories that would be reported. iii. Finally, indicate if the information presented is in the form of actual or estimated amounts. ii. Calculate your friend's ratio, label your work, and provide an interpretation of their results iii. If 35% is considered a manageable level of debt, do you think that your friend will have any problems meeting their loan payments on time? Explain why or why not. b. Liquidity Ratio: i. Discuss the purpose of this ratio and indicate how it is utilized to evaluate personal financial progress. ii. Calculate your friend's ratio, label your work, and provide an interpretation of their results. iii. If creditors consider 2.0 (two years) to be a minimum acceptable liquidity ratio before they will grant a loan, do you think that your friend will have any problems obtaining a loan? Explain why or why not. For this assignment, assume that you were discussing what you learned in this module with a friend, and they were so impressed with your knowledge that they asked you to help to evaluate their personal financial position. They completed their own Balance Sheet and Income and Expense Statement with another friend and provided key information as follows (in alphabetical order): Category Amount Annual After-Tax Income $52,500 Cash Surplus $7,200 Monthly Gross (Before- $6,200 Tax) Income Net Worth $30,000 Total Assets $165,000 Total Current Debts $11,800 Total Liquid Assets $18,500 Total Monthly Loan Payments $850 Respond to the following using the above information 1. Describe the components of personal financial statements and their role in the financial planning process by addressing the following: a. Balance Sheet: i. Describe the purpose of this statement along with its three components in the order in which they appear in this report. ii. For the first two components, provide two examples of the categories that would be reported. iii. Finally, indicate if the information presented is in the form of actual or estimated amounts. b. Income and Expense Statement: i. Describe the purpose of this statement along with its three components in the order in which they appear in this report. ii. For the first two components, provide two examples of the categories that would be reported. iii. Finally, indicate if the information presented is in the form of actual or estimated amounts. ii. Calculate your friend's ratio, label your work, and provide an interpretation of their results iii. If 35% is considered a manageable level of debt, do you think that your friend will have any problems meeting their loan payments on time? Explain why or why not. b. Liquidity Ratio: i. Discuss the purpose of this ratio and indicate how it is utilized to evaluate personal financial progress. ii. Calculate your friend's ratio, label your work, and provide an interpretation of their results. iii. If creditors consider 2.0 (two years) to be a minimum acceptable liquidity ratio before they will grant a loan, do you think that your friend will have any problems obtaining a loan? Explain why or why not.
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Related Book For
Fundamentals Of Financial Management
ISBN: 9780357517574
16th Edition
Authors: Eugene F. Brigham, Joel F. Houston
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