- Joined
- Feb 10, 2014
- Messages
- 1
- Reaction score
- 0
Problem #1: Financial Statements (36 marks)
1. Use the following information on Stan’s finances in 2013 to answer the questions below. Assume all balance are reported as of December 31, 2013
Monthly take-home salary $3,400
Monthly rent payments $1,200
Monthly income from side tech consulting business $600
Checking account balance $950
Savings account balance $2,000
Monthly automatic savings deposit $250
Cell phone bill $90
Monthly auto loan payment $525
RRSP account balance $5,000
Future Shop Credit Card Balance (24.99% APR) $4,000
Monthly utility expenses $175
Monthly Future Shop credit card payment $100
Monthly entertainment expense $100
Monthly TTC Pass $120
Outstanding balance on credit card (18% APR) $14,000
Value of auto $12,000
Balance of auto loan (12% APR) $8,000
Monthly credit card bill $450
Monthly student loan payment $245
Monthly gym membership $125
Monthly expense on food/groceries $150
Annual car insurance premium $900
Balance of student loan (8% APR) $23,000
The income from the side tech business is after-tax.
A. Construct a balance sheet and a monthly cash flow statement (10 points)
B. What is Stan’s net worth? (2 points)
C. What is Stan’s monthly surplus or deficit? (2 points)
D. What is Stan’s Liquidity Ratio, Asset-to-Debt Ratio, Investment Assets-to-Total Assets Ratio, and Debt Payments-to-Net Income Ratio (8 points)(**Note: For this Debt Payments-to-Net Income Ratio, assume Net Income is total income minus taxes, but not minus expenses)
E. What do these ratios tell you? (8 points)
F. Based on this, list three changes you would recommend regarding his financial situation. (6 points)
1. Use the following information on Stan’s finances in 2013 to answer the questions below. Assume all balance are reported as of December 31, 2013
Monthly take-home salary $3,400
Monthly rent payments $1,200
Monthly income from side tech consulting business $600
Checking account balance $950
Savings account balance $2,000
Monthly automatic savings deposit $250
Cell phone bill $90
Monthly auto loan payment $525
RRSP account balance $5,000
Future Shop Credit Card Balance (24.99% APR) $4,000
Monthly utility expenses $175
Monthly Future Shop credit card payment $100
Monthly entertainment expense $100
Monthly TTC Pass $120
Outstanding balance on credit card (18% APR) $14,000
Value of auto $12,000
Balance of auto loan (12% APR) $8,000
Monthly credit card bill $450
Monthly student loan payment $245
Monthly gym membership $125
Monthly expense on food/groceries $150
Annual car insurance premium $900
Balance of student loan (8% APR) $23,000
The income from the side tech business is after-tax.
A. Construct a balance sheet and a monthly cash flow statement (10 points)
B. What is Stan’s net worth? (2 points)
C. What is Stan’s monthly surplus or deficit? (2 points)
D. What is Stan’s Liquidity Ratio, Asset-to-Debt Ratio, Investment Assets-to-Total Assets Ratio, and Debt Payments-to-Net Income Ratio (8 points)(**Note: For this Debt Payments-to-Net Income Ratio, assume Net Income is total income minus taxes, but not minus expenses)
E. What do these ratios tell you? (8 points)
F. Based on this, list three changes you would recommend regarding his financial situation. (6 points)