§ Angela earns $2,170 per month before taxes in her full-
time job and $900 before taxes in her part-time job.
About $650 per month is needed to pay taxes.
§ What is Angela’s disposable income?
PERSONAL FINANCAL
STATEMENT
§ Angela (from problem 1A) inspects her checkbook
and her credit card bills and determines that she § . Angela makes a budget based on her personal
has the following monthly expenses: cash flow statement. In two months, she must pay
o Rent $500 $375 for tags and taxes on her car.
o Cable TV $30 § How will this payment affect her net cash flow for
o Electricity $100 that month? Suggest ways that Angela might handle
o Water $25 this situation.
o Telephone $40
§ What is Angela’s net cash flow?
§ From the information in problems 1 through 3, how § Angela analyzes her personal budget and decides
much can Angela expect to save in the next 12 that she can reduce her rec- reational spending by
months? $50 per month. How much will that increase her
annual savings?
§ What will her annual savings be now?
§ If Angela is saving $350 per month, what is her § A rumor of "right sizing" at Ojai's engineering firm has him
savings rate (i.e., savings as a percentage of and his wife Kaya concerned about their preparation for
disposable income)? meeting financial emergencies. Help them calculate their net
worth, calculate and interpret the current ratio given the
following assets and liabilities:
§(C). George and Betty, a middle-aged couple, have
watched their savings account dwindle over the years.
They both make good incomes and can't understand §1. What is George and Betty's net income?
why they aren't saving more each month. Below is their
financial information to complete an income statement. §2. What is their current savings ratio?
§ Gross monthly income: $8,000 §3. George and Betty ask you for financial
§ Income taxes withheld monthly: $2,300 advice. What would you tell them to do?
§ Monthly interest income from investments: $100
§ Monthly insurance payments: $700
§ Monthly housing expenses: $4,500
§ Monthly food expenses: $800
§ Miscellaneous expenses: $400
§ (D). Tim and Autumn Davis are trying to figure out their
current financial health. They will pay off their car loan in
three years, their gross household income is $5,700 per
month, and they receive $95 per month in interest income §1.What is their current net worth?
from their investments. They have listed the following items §2.Assuming that they have no current bills
from their most recent statements.
§ Savings account: $3,200 other than those that are listed, what is their
§ Checking account: $1,800 current ratio?
§ Credit card balance: $3,000 §3.What is their debt ratio?
§ Car loan balance: $18,000
§ Car market value: $15,000 §4.What is their month's living expenses
§ Furniture market value: $4,000 covered ratio?
§ Stocks and bonds: $15,000
§ (E). How do you calculate the current ratio, debt
ratio, and savings ratio?
§ (F) Explain the relationship between the debt
ratio and insolvency?
§ (G)A financial ratio by itself is of little value. To
what can you compare your financial ratios to
make them valuable financial planning tools?
§ (H) Does your use of debt affect your net worth?
§ (I) How can an income statement help you stay
solvent?
