FHCE 2100 Lecture Notes - Lecture 19: Debt Service Ratio, Gross Income, Quick Ratio
10 Oct 2016
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Shows how much of a decline in the market value of their assets a family can have before becoming insolvent - unable to pay money owed by you on time. Solvency ratio = net worth/total assets: balance sheet. $ 6,374/9,023 = 0. 706 or 71% (cid:862)jack can withstand a 71% de(cid:272)li(cid:374)e i(cid:374) (cid:373)arket (cid:448)alue of assets (cid:271)efore (cid:271)e(cid:272)o(cid:373)i(cid:374)g i(cid:374)sol(cid:448)e(cid:374)t. (cid:863) Shows how much of their one-year liabilities they could pay with their liquid assets (cash, checking account, savings account, certificates of deposit maturing in less than 1 year) How long a family could withstand financial problems. Liquidity ratio = liquid assets/total current debts: total (cid:272)urre(cid:374)t de(cid:271)ts = all u(cid:374)paid (cid:271)ills; all of re(cid:448)ol(cid:448)i(cid:374)g (cid:272)redit (cid:272)ard (cid:271)ills; o(cid:374)e (cid:455)ear"s worth of mortgage, installment loans, and other loans. Liquid assets / total current liabilities: total current liabilities includes monthly installment loan payments for year. Truck loan = (per income/expense statement)
