Current Ratio

1. Current Ratio Calculate the current ratio using the information above. Remember, the current ratio is Monetary Assets/Current Liabilities.

2. Current Ratio explained • Monetary Assets= Cash, checking, savings/CDs, money market funds • Current Liabilities= current bills and credit card debts • $2300 + $825 + $400 =3525 =3.09 $355 + $245 + $275 + $265 1140

3. Month’s Living Expenses Covered Ratio Calculate the month’s living expenses covered ratio, which is Monetary assets/(annual living expenditures/12)

4. Monthly Living… explained • Monetary Assets= Cash, checking, savings/CDs, money market funds • Annual Living Expenses (can be found on income statement) • $2300 + $825 + $400 =3525 =.81 $52,296/12 4358 Meaning they have enough cash and liquid assets on hand to cover .81 months of expenditures

5. Debt Ratio • Calculate the debt ratio, using the total debt or liabilities/ total assets

6. Debt Ratio Explained • Tells what percentage of your assets has been financed by borrowing • $189,600 =.63 or 63% of their income $301,250 If you manage your finances well, this ratio should go down as you get older.

7. Long Term Debt Coverage Ratio • Calculate the long term debt coverage ratio using Total Income Available for Living Expenses/Total Long-Term Debt Payments

8. Long-term Explained • Living Expenses (given on income statement) • Debt payments can be found by adding all long-term debts (payments over a year) • 65,510________ = 2.16 $20,656 + $2,588+ $1500+ $265 • A debt coverage ratio of less than approximately 2.5 should raise a caution flag.

9. Calculate Savings Ratio • Calculate the savings ratio using Income Available for Savings and Investment/ Income Available for Living Expenses

10. Savings Ratio Explained • $4276 = .076 $56,510 • Explains how much of your income you are saving and investing

11. Calculate Net Worth • Assets- Liabilities = Net Worth or Equity