Kim and Walter come to see you as they are having problems making ends meet each month.
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Question:
Kim and Walter come to see you as they are having problems making ends meet each month. They are starting to miss payments because their expenses exceed their income each month. You have prepared their net worth and cash flow statements.
Net Worth Statement | ||||
Kim and Walter | ||||
Year Ending 2023 | ||||
Assets | Liabilities | |||
Chequing Account | $2,500 | Car Loan | 15000 | |
CSB | $2,500 | Credit Card | 24000 | |
RRSP | $55,000 | Student Loan | 18000 | |
Car | $35,000 | Mortgage | 271,377 | |
House | 550,000 | 328,377.07 | ||
$645,000 | ||||
Net Worth | $316,623 |
Cash Flow Statement | ||||
Kim and Walter | ||||
Year Ending 2023 | ||||
Inflows | Outflows | |||
Gross Income | 96,300 | Insurance | $3,600 | |
Income taxes/Deductions | 26127 | Vacation | $5,000 | |
Net Income | 70,173 | Water/Elect. | $1,500 | |
Food | $6,000 | |||
Car Loan Payments | $6,000 | |||
RRSP Contr | $2,400 | |||
Heat | $1,800 | |||
Property Taxes | $3,600 | |||
Ent | $4,000 | |||
Transport | $2,800 | |||
Mortgage | $24,925 | |||
Credit Card Pay | $7,200 | |||
Student Loan | $3,600 | |||
$ 72,425 | ||||
Deficit or Surplus | $(2,252) |
Requirements:
1) Analyze their current financial situation by commenting on their Net Worth and Cash flow statement. (3 marks)
2) Prepare their financial ratios (emergency fund, savings and debt ratio) and comment on each ratio. (6 marks)
3) Based on your analysis, provide this couple with three recommendations, including the benefits and drawbacks of each. (6 marks)
Related Book For
Financial Accounting and Reporting a Global Perspective
ISBN: 978-1408076866
4th edition
Authors: Michel Lebas, Herve Stolowy, Yuan Ding
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