Question: You prepare a balance sheet for your client, whose disposable income for the year is $80,000 and whose annual living expenses total $75,000. Assets Liabilities

You prepare a balance sheet for your client, whose disposable income for the year is

$80,000 and whose annual living expenses total $75,000.

Assets Liabilities and Net Worth

Cash in savings account 4,000 Credit card debt 12,000

GICs (cashable in 30 days) 6,000 Line of credit outstanding 18,000

Current Assets 10,000 Current Liabilities 30,000

Automobile 25,000 Car loan (due in 2 years) 20,000

Personal assets 30,000 Mortgage (due in 15 years) 230,000

RRSP 75,000 Total Liabilities 280,000

House 320,000 Net worth 180,000

Total Assets 460,000 Liabilities and Net Worth 460,000

a) Compute the savings ratio.

b) Calculate the liquidity ratio.

c) Calculate the debt ratio.

d) After examining the balance sheet, what advice would you give to your client?

Explain your answer

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