Based on the following data, calculate the ratios requested: Long-term liabilities $854,321 ,Net worth $1,448,000 Liquid assets $55,200 ,Current liabilities $45,650 Credit card repayments $5,540, MPF $12,000 Interest earned on savings $150 Gross income $281,850 Car loan repayment $38,087 ,Property market value $685,483 a

(a) The Debt ratio can be calculated by the following formula :-

Debt ratio = Liabilities / Net Worth

Here, given in the question :-

Liabilities = $854,321

Net Worth = $1,448,000

Therefore, Debt ratio = $854,321 / $1,448,000 = 0.59

(b) The Debt-payment ratio can be calculated by the following formula :-

Debt-payment ratio = Monthly Credit Payment / Take-home pay

Here, given in the question :-

Credit card repayments = $5,540

Car loan repayment = $38,087

Thus, Monthly Credit Payment = ($5,540 + $38,087) = $43,627

Gross income = $281,850

Interest earned on savings = $150

MPF = $12,000

Take-home pay = ($281,850 + $150 - $12,000) = $270,000

Therefore, Debt-payment ratio = $43,627 / $270,000 = 0.16