Note: Net income means the same as \"after tax\" income. 1.Calculate Carmelo’s n

Question

Note: Net income means the same as "after tax" income.

1.Calculate Carmelo’s net worth.

2.Calculate Carmelo’s liquidity ratio.

3.Can Carmelo go more than a month without a paycheck?

4.Calculate Carmelo's current ratio and complete the sentence: For every $1 in current liabilities Carmelo has $ ______ in liquid assets.

5.Calculate Carmelo’s debt ratio. Explain what it means.

6.Calculate Carmelo’s savings ratio. Explain what it means.

7.Calculate Carmelo’s debt payment ratio (do not include mortgage payment). Explain if Carmelo is in the <20% range.

8.Calculate Carmelo’s mortgage debt service ratio. Explain what it means.

Assets Debts Other Total assets: $180,000 Credit card balance: $1,500 Of the total: Liquid assets $5,000Long-term debt: $160,000 Monthly gross income: $10,000 Other short-term debt: $4,500 Monthly net income: $7,000 Monthly mortgage payment including principal, interest, taxes and insurance: $1,300 Other monthly debt payments: $450 Total monthly expenses: $6,200 Monthly savings: $700 Total Debt: $166,000

Explanation / Answer

As per rules I am answering the first 4 subparts of the question

1:Net worth = Total assets- Total liabilities

= 180000-166000 = $14000

2: Liquidity ratio = Current assets/Current liabilities

= 5000/(1500+4500)

= 0.83

3: No

Since monthly expenses are more than the previous month’s savings, Carmello cannot go without the paycheck even for a month.

4: Current ratio = Current assets/Current liabilities

= 5000/(1500+4500)

= 0.83

For every $1 in current liabilities Carmelo has $ 0.83 in liquid assets.

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.